Each of the four independent situations below describes a finance lease in which annual lease payments arepayable 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 andPVAD of $1)Situation1234Lease term (years)Lessor's rate of return410%711%589%12%Fair value of lease asset$ 56,000$ 356,000$ 81,000$ 471,000Lessor's cost of lease asset$ 56,000$ 356,000$ 51,000$ 471,000Residual value:Estimated fair value0$ 56,000Guaranteed fair value00$ 13,000$13,000$ 51,000$ 56,000Required:a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount theessee 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.Answer is complete but not entirely correct.LeasePaymentsResidualValueGuaranteePV ofLeasePV of ResidualRight-of-usePaymentsValueGuaranteeAsset/LeaseLiabilitySituation 1$16,060$0$ 56,000$0 $56,000Situation 2$62,905$0$329,027 $0$329,027Situation 3$17,112$0 $72,551 $0$0 ×Situation 4$80,590$2,019$448,383$2,019$471,000

Computation of lease paymentsParticularsAmountFair value (a) $56,000PVIFA @ 10%,4yrs (b)…

Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the essee 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.

Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the essee 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.

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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