hrd.8
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
hrd.8
![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
$ 70,000
$ 70,000
4
10%
Residual Value
Guarantee
0
0
$
2
7
11%
$ 370,000
$ 370,000
PV of Lease
Payments
$ 70,000
0
Situation
70,000 $
$
GA
3
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
5
$ 95,000
$ 65,000
9%
$ 27,000
$ 27,000
0
0
0
8
12%
$
$ 485,000
$ 485,000
$ 39,000
$ 44,000
Right-of-use
Asset/Lease
Liability
70,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe3aa1771-3815-4a15-aec9-b1d65dd56928%2F4aaeb1fc-d826-4648-84c9-e19c10277f1d%2Faqdk7m_processed.gif&w=3840&q=75)
Transcribed Image Text: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
$ 70,000
$ 70,000
4
10%
Residual Value
Guarantee
0
0
$
2
7
11%
$ 370,000
$ 370,000
PV of Lease
Payments
$ 70,000
0
Situation
70,000 $
$
GA
3
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
5
$ 95,000
$ 65,000
9%
$ 27,000
$ 27,000
0
0
0
8
12%
$
$ 485,000
$ 485,000
$ 39,000
$ 44,000
Right-of-use
Asset/Lease
Liability
70,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education