1- Rabbit Inc. has an asset with a fair market value of $450,000 that it wants to lease. Rabbit's wants to recover its net investment in the leased asset and earn an 8%. The asset will revert back to Rabbit's at the end of a 5-year lease term and it is expected that the residual value of the asset will be $20,000 at the end of the lease. If Rabbit wants to charge rent semi-annually starting at the beginning of the lease, what amount should the lease payments be ?

a) $60,817

b) $51,745

c) $101,200

d) $104,367

2-Frank Corporation has an asset with a fair market value of $200,000 that it wants to lease. Frank's wants to recover its net investment in the leased asset and earn a 10% return. The asset will revert back to Frank's at the end of a 6-year lease term. If Frank's charges rent annually at the beginning of the year, what should amount should the annual rent ?

a) $18,817

b) $33,333

c) $41,747

d) $53,333

3-On January 2, 2018, Cambridge Ltd. signed a ten-year non-cancellable lease for a heavy-duty drill press. The lease required annual payments of $35,000, starting December 31, 2018, with title passing to Cambridge at the end of the lease. Cambridge is accounting for this lease as a capital (finance) lease. The drill press has an estimated useful life of 20 years, with no residual value. Cambridge uses straight-line depreciation for all its plant assets. The lease payments were determined to have a present value of $215,000, based on an implicit interest rate of 10%. 9. On their 2018 income statement, how much interest expense should Cambridge report in connection with this lease?

a) $0

b) $13,125

c) $17,500

d) $21,500

4-Assume Sunny Corp. (a company reporting under IFRS) wants to earn an 8% return on its investment of $1,200,000 in an asset that is to be leased to Cloudy Corp. for ten years with an annual rental due in advance each year. How much should Sunny charge for annual rental assuming there is no purchase option that is reasonably certain to be exercised by Cloudy Corp.?

a) $120,000

b) $165,588

c) $178,835

d) $216,000