Each of the four independent situations below describes a finance lease in which annual lease...
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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 lessors 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) 4 7 5 8 Lessor's rate of return 10% 11% 9% 12% Fair value of lease asset $ 61,000 $ 361,000 $ 86,000 $ 476,000 Lessor's cost of lease asset $ 61,000 $ 361,000 $ 56,000 $ 476,000 Residual value: Estimated fair value 0 $ 61,000 $ 18,000 $ 30,000 Guaranteed fair value 0 0 $ 18,000 $ 35,000
Required:
a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee 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.
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 lessors 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) | 4 | 7 | 5 | 8 |
| Lessor's rate of return | 10% | 11% | 9% | 12% |
| Fair value of lease asset | $ 61,000 | $ 361,000 | $ 86,000 | $ 476,000 |
| Lessor's cost of lease asset | $ 61,000 | $ 361,000 | $ 56,000 | $ 476,000 |
| Residual value: | ||||
| Estimated fair value | 0 | $ 61,000 | $ 18,000 | $ 30,000 |
| Guaranteed fair value | 0 | 0 | $ 18,000 | $ 35,000 |
Required:
a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee 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.
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