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Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. 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 2 Lease term (years) 4 3 Lessor's rate of return 12% 12% 10% Fair value of leased asset $ 88,000 $ 434,000 Lessor's cost of leased asset $ 64,000 $ 434,000 $ 199,000 $ 159,000 Purchase option: Exercise price $ 24,000 $ 64,000 $ 36,000 Exercisable at end of year: 2 Reasonably certain? yes no yes Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar amount.

Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. 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 2 Lease term (years) 4 3 Lessor's rate of return 12% 12% 10% Fair value of leased asset $ 88,000 $ 434,000 Lessor's cost of leased asset $ 64,000 $ 434,000 $ 199,000 $ 159,000 Purchase option: Exercise price $ 24,000 $ 64,000 $ 36,000 Exercisable at end of year: 2 Reasonably certain? yes no yes Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar amount.

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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Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. 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 Lease term (years) Lessor's rate of return 4 12% 4 3 12% 10% Fair value of leased asset $ 88,000 Lessor's cost of leased asset $ 64,000 $ 434,000 $ 434,000 $ 199,000 $ 159,000 Purchase option: Exercise price $ 24,000 $ 64,000 $ 36,000 Exercisable at end of year: 4 4 2 Reasonably certain? yes no yes Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar amount. Annual lease payments Situation 1 Situation 2 Situation 3
Transcribed Image Text:Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. 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 Lease term (years) Lessor's rate of return 4 12% 4 3 12% 10% Fair value of leased asset $ 88,000 Lessor's cost of leased asset $ 64,000 $ 434,000 $ 434,000 $ 199,000 $ 159,000 Purchase option: Exercise price $ 24,000 $ 64,000 $ 36,000 Exercisable at end of year: 4 4 2 Reasonably certain? yes no yes Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar amount. Annual lease payments Situation 1 Situation 2 Situation 3
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