Question
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
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. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
| Situation | ||||||||||||||||||
| 1 | 2 | 3 | 4 | |||||||||||||||
| Lease term (years) | 5 | 8 | 6 | 9 | ||||||||||||||
| Lessor's rate of return | 8 | % | 9 | % | 7 | % | 10 | % | ||||||||||
| Fair value of lease asset | $ | 63,000 | $ | 363,000 | $ | 88,000 | $ | 478,000 | ||||||||||
| Lessor's cost of lease asset | $ | 63,000 | $ | 363,000 | $ | 58,000 | $ | 478,000 | ||||||||||
| Residual value: | ||||||||||||||||||
| Estimated fair value | 0 | $ | 63,000 | $ | 20,000 | $ | 32,000 | |||||||||||
| Guaranteed fair value | 0 | 0 | $ | 20,000 | $ | 37,000 | ||||||||||||
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 above situations. (Round your PV factor answers to 5 decimal places and other answer to nearest whole dollar.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Managerial Accounting And Analysis In Multinational Enterprises
Authors: H. Peter Holzer, Hanns Martin W. Schoenfeld
1st Edition
0899250874, 978-0899250878
