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Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate 1 4 6 $44,000 No Beg. of yr. 5% 5% Situation 4 5 $45,000 Yes End of yr. 6% 5% 3 4 $41,000 No Beg. of yr. 5% 5% 4 4 6 $38,000 No End of yr. 6% 5% Each of the four independent situations above describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate 1 4 6 $44,000 No Beg. of yr. 5% 5% Situation 4 5 $45,000 Yes End of yr. 6% 5% 3 4 $41,000 No Beg. of yr. 5% 5% 4 4 6 $38,000 No End of yr. 6% 5% Each of the four independent situations above describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value. Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2. 3. 4. 1 4 6 $44,000 Lease Classification No Beg. of yr. 5% 5% 2 4 Situation 5 $45,000 Yes End of yr. 6% 5% 3 4 6 $41,000 No Beg. of yr. 5% 5% 4 4 6 $38,000 Each of the four independent situations above describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) No End of yr. 6% 5%
Transcribed Image Text:Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value. Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2. 3. 4. 1 4 6 $44,000 Lease Classification No Beg. of yr. 5% 5% 2 4 Situation 5 $45,000 Yes End of yr. 6% 5% 3 4 6 $41,000 No Beg. of yr. 5% 5% 4 4 6 $38,000 Each of the four independent situations above describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) No End of yr. 6% 5%
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