Question
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The
Each of the three 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 lessor's 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) | 10 | 20 | 4 |
| Lessor's rate of return (known by lessee) | 10% | 8% | 11% |
| Lessee's incremental borrowing rate | 11% | 9% | 10% |
| Fair value of lease asset | $760,000 | $1,140,000 | $345,000 |
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.
| Lease Payments | Right of use Asset/Lease Payable | |
| Situation 1 | ||
| Situation 2 | ||
| Situation 3 |
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
Principles Of Auditing: An International Perspective
Authors: Rick Stephan Hayes, Philip Wallage, Arnold Schilder, Roger Dassen
1st Edition
0077095324, 978-0077095321
