Each of the three independent situations below describes afinance lease in which annual lease payments are payable at theend of each year. The lessee is aware of the lessor’simplicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from thetables provided.)
| Situation |
| 1 | 2 | 3 |
| Lease term (years) | 10 | 15 | 5 |
| Lessor's rate of return | 10% | 8% | 11% |
| Lessee's incremental borrowing rate | 11% | 9% | 10% |
| Fair value of lease asset | $780,000 | $1,070,000 | $275,000 |
|
Required:
a. & b. Determine the amount of the annual lease payments ascalculated by the lessor and the amount the lessee would record asa right-of-use asset and a lease liability, for above situations.(Round your answers to nearest whole dollar.)
