Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6]

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.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

	Situation
1	2	3	4
Lease term (years)	4	7	5	8
Lessor's rate of return	10%	11%	9%	12%
Fair value of lease asset	$ 70,000	$ 370,000	$ 95,000	$ 485,000
Lessor's cost of lease asset	$ 70,000	$ 370,000	$ 65,000	$ 485,000
Residual value:
Estimated fair value	0	$ 70,000	$ 27,000	$ 39,000
Guaranteed fair value	0	0	$ 27,000	$ 44,000

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.