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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text: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)
Situation
1
2
3
4
Lease term (years)
Lessor's rate of return
4
10%
7
11%
5
8
9%
12%
Fair value of lease asset
$ 56,000
$ 356,000
$ 81,000
$ 471,000
Lessor's cost of lease asset
$ 56,000
$ 356,000
$ 51,000
$ 471,000
Residual value:
Estimated fair value
0
$ 56,000
Guaranteed fair value
0
0
$ 13,000
$13,000
$ 51,000
$ 56,000
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.
Answer is complete but not entirely correct.
Lease
Payments
Residual
Value
Guarantee
PV of
Lease
PV of Residual
Right-of-use
Payments
Value
Guarantee
Asset/Lease
Liability
Situation 1
$
16,060
$
0
$ 56,000
$
0 $
56,000
Situation 2
$
62,905
$
0
$
329,027 $
0
$
329,027
Situation 3
$
17,112
$
0 $
72,551 $
0
$
0 ×
Situation 4
$
80,590
$
2,019
$
448,383
$
2,019
$
471,000
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