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 | 10 | % | 11 | % | 9 | % | 12 | % | ||||||||||
| Fair value of lease asset | $ | 53,000 | $ | 353,000 | $ | 78,000 | $ | 468,000 | ||||||||||
| Lessor's cost of lease asset | $ | 53,000 | $ | 353,000 | $ | 48,000 | $ | 468,000 | ||||||||||
| Residual value: | ||||||||||||||||||
| Estimated fair value | 0 | $ | 53,000 | $ | 10,000 | $ | 48,000 | |||||||||||
| Guaranteed fair value | 0 | 0 | $ | 10,000 | $ | 53,000 | ||||||||||||
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.)
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Principles Of Corporate Finance
Authors: Richard A Brealey, Stewart C Myers, Franklin Allen
8th Edition
0073130826, 9780073130828
