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Each of the four independent situations below describes a direct financing lease in which annual...

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Accounting

Each of the four independent situations below describes a direct financing lease in which annual lease payments of $16,500 are payable at the beginning of each year. Each is a capital lease for the lessee.
Situation

1 2 3 4
Lease term (years) 5 5 5 5
Assets useful life (years) 5 6 6 6
Lessors implicit rate (known by lessee) 11 % 11 % 11 % 11 %
Lessees incremental borrowing rate 11 % 12 % 11 % 12 %
Residual value:
Guaranteed by lessee 0 $ 5,300 0 0
Guaranteed by third party 0 0 $ 5,300 0
Unguaranteed 0 0 0 $ 5,300

Determine the following amounts at the inception of the lease:

. The lessors:
1. Minimum lease payments $82,500 87,800 87,800 82,500
2. Gross investment in the lease 82,500 87,800 87,800 87,800
3. Net investment in the lease
B. The lessees:
4. Minimum lease payments
5. Leased asset
6. Lease liability

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