Each of the independent situations below describes a finance lease in which annual lease payments...
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Accounting
- Each of the 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 interest rate.
| Situation | ||||
| 1 Lessee | 2 Lessor | |||
| Lease term | 10 | years | 20 | years |
| Lessor's desired | ||||
| rate of return | 10 | % | 12 | % |
| Lessee's incremental | ||||
| borrowing rate | 12 | % | 10 | % |
| Fair value of asset | $ 600,000 | $ 400,000 |
For convenience, here are some table values:
| Periods; interest rate | PV, ordinary annuity | PV, annuity due |
| 10 periods, 10% | 6.1446 | 6.7590 |
| 10 periods, 12% | 5.6502 | 6.3283 |
| 20 periods, 10% | 8.5136 | 9.3649 |
| 20 periods, 12% | 7.4694 | 8.3658 |
Required:For each situation determine the amount of the annual lease payment, as calculated by the lessor. Note: Round your answers to the nearest whole dollar amounts.
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