Situation23Lease term (years)Asset's useful life (years)Asset's fair value4444666$44,000$45,000$41,000$38,000Purchase option that is reasonablycertain to be exercised?NoYesNoNoEnd of yr.End of yr.Annual lease paymentsLessor's implicit rate (known by lessee)Lessee's incremental borrowing rateBeg. of yr.Beg. of yr.5%6%5%6%5%5%5%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) (Useappropriate factor(s) from the tables provided.)SituationLease Classification1.2.3.4.

Situation 3. 4 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 4 4 4 6. $44,000 $45,000 $41,000 $38,000 No Yes No No End of yr. End of yr. Beg. of yr. 5% Beg. of yr. 5% 6% 6% 5% 5% 5% 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.) Situation Lease Classification 1. 2. 4. 245 146 23.

Situation 3. 4 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 4 4 4 6. $44,000 $45,000 $41,000 $38,000 No Yes No No End of yr. End of yr. Beg. of yr. 5% Beg. of yr. 5% 6% 6% 5% 5% 5% 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.) Situation Lease Classification 1. 2. 4. 245 146 23.

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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Problem 15-9 (Algo) Lease concepts; sales-type leases; guaranteed and unguaranteed residual value [LO15-2, 15-6] Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: eaved Each of the four independent situations below describes a sales-type lease in which annual lease payments of $16,000 are payable at the beginning of each year. Each is a finance lease for the lessee. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Guaranteed by lessee. Unguaranteed Purchase option: After (years) Exercise price. Reasonably certain? 1 4 4 11% e e none n/a n/a Situation 2 4 5 11% $ 6,400 0 www www 3 $8,200 no 3 4 5 11% $3,200 $3,200 $2,200 no Next 4 4 7 11% Save & Exit Submit 8 $.6,400 $4,200 yes Activate Windows
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