Question
Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5] Each of the three independent situations below describes a capital
Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5]
| Each of the three independent situations below describes a capital 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 | |
| Lease term (years) | 10 | 20 | 4 |
| Lessors rate of return (known by lessee) | 11% | 9% | 12% |
| Lessees incremental borrowing rate | 12% | 10% | 11% |
| Fair value of leased asset | $710,000 | $1,090,000 | $295,000 |
| Required: |
| a. | Determine the amount of the annual lease payments as calculated by the lessor and above situations. |
situation 1
Situation 2
situation 3
| b. | Determine the amount lessee would record as a leased asset and a lease liability for above situations. |
| situation 1 Situation 2 situation 3 |
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College Accounting
Authors: Heintz and Parry
20th Edition
1285892070, 538489669, 9781111790301, 978-1285892078, 9780538489669, 1111790302, 978-0538745192
