Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value Situation 1 Situation 2 Situation 3 Situation 4 Lease Payments 4 10% $ 70,000 $ 70,000 0 $ 2 Residual Value PV of Lease Guarantee Payments 70,000 Situation $ 370,000 $ 370,000 7 11% $ 70,000 0 $ $ $ 3 5 9% $ 95,000 $ 65,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. PV of Residual Value Guarantee $ 27,000 $ 27,000 8 12% 0 $ 0 0 $ 485,000 $ 485,000 $39,000 $ 44,000 Right-of-use Asset/Lease Liability 70,000
Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value Situation 1 Situation 2 Situation 3 Situation 4 Lease Payments 4 10% $ 70,000 $ 70,000 0 $ 2 Residual Value PV of Lease Guarantee Payments 70,000 Situation $ 370,000 $ 370,000 7 11% $ 70,000 0 $ $ $ 3 5 9% $ 95,000 $ 65,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. PV of Residual Value Guarantee $ 27,000 $ 27,000 8 12% 0 $ 0 0 $ 485,000 $ 485,000 $39,000 $ 44,000 Right-of-use Asset/Lease Liability 70,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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