Question
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end 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 | |
| Lease term (years) | 9 | 20 | 4 |
| Lessor's rate of return (known by lessee) | 11% | 9% | 12% |
| Lessee's incremental borrowing rate | 12% | 10% | 11% |
| Fair value of lease asset | $620,000 | $990,000 | $195,000 |
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 each of the above situations. (Round your answers to the nearest whole dollar.)
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
