*41,000 is also not a correct answer for 1a, 36,000 is also not a correct answer for 1b*

Question 1 Partially correct Mark 1.00 out of 4.00 P Flag question Edit question Identifying Lease Payments For each of the following four separate finance leases scenarios, determine the lease payment that the lessee should use to determine the appropriate lease classification. a. Lease payments are $3,000 per month plus 5% of lessee net sales. Lessee sales for year one are estimated to be $100,000. b. Lease payments are computed as the greater of (a) 5% of lessee net sales or (b) $3,000. Lessee sales for year one are estimated to be $100,000. C. Annual lease payments are 10% of lessee annual sales, with no fixed portion. Lessee sales for year one are estimated to be $100,000. d. Lease payments total $5,000 in year one and increase each year based on the annual increase in the CPI at the end of the preceding year. The CPI at the end of the current year is expected to be 2%. a. Lease payment $ b. Lease payment $ C. Lease payment $ d. Lease payment $ 8,000 x 5,000 x 10,000 x 5,000 Question 2 Partially correct Mark 15.00 out of 18.00 Flag question O Edit question Classifying Leases The following separate scenarios relate to a 5 year lease, pertaining to equipment with a fair value of $25,000. Assume in all scenarios that payments are made at the beginning of the period. 1. Lease payments include a fixed payment of $5,000 per year. 2. Lease payments include a fixed payment of $5,000 per year, plus $250 for insurance and $300 for a maintenance contract. 3. Lease payments will be $5,000 in the first year and will increase by 3% (calculated on the previous year's payment) for each of the following 4 years. 4. Lease payments will be $5,000 in the first year and will increase each of the following years by the increase in the CPI from the preceding year. The current CPlis 120 and is expected to increase to 122 at the end of the next year. 5. Lease payments will be $5,000 in the first year and will increase each of the following years by (a) the increase in the CPI from the preceding year, or (b) 3%, whichever is greater. The current CPI is 120 and is expected to increase to 122 at the end of the next year. 6. Lease payments include a fixed payment of $5,000 per year. In addition, the lessee has guaranteed the residual value of the equipment for $1,000 at the end of the lease. Required For each of the six separate scenarios outlined above, and considering only the fair value lease criterion, determine how the lessee would classify the lease, assuming a discount rate of 7%. Note: Round amounts in table to the nearest whole dollar. PV of Lease Payments 90% of Fair Value Lease Classification $ 21,936 $ 22,500 Operating Lease 23,033 $ 22,500 Finance Lease 3 23,197 XS 22,500 Finance Lease 22,385 X 5 22,500 Operating Lease 5 23,197 * $ 22,500 Finance Lease 6 $ 22,649 $ 22,500 Finance Lease