Question
For each of the three independent situations below determine the amount of the annual lease payments. Each describes a capital lease in which annual lease
| For each of the three independent situations below determine the amount of the annual lease payments. Each describes a capital lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. (FV of $1,PV of $1,FVA of $1,PVA of $1,FVAD of $1andPVAD of $1)(Use appropriate factor(s) from the tables provided.) |
| Situation | |||||||||
| 1 | 2 | 3 | |||||||
| Lease term (years) | 5 | 10 | 4 | ||||||
| Lessors rate of return | 10 | % | 11 | % | 9 | % | |||
| Fair value of leased asset | $ | 62,000 | $ | 421,000 | $ | 186,000 | |||
| Lessors cost of leased asset | $ | 51,000 | $ | 421,000 | $ | 146,000 | |||
| Bargain purchase option: | |||||||||
| Option price | $ | 11,000 | $ | 51,000 | $ | 23,000 | |||
| Exercisable at end of year: | 5 | 5 | 3 |
| Determine the annual lease payments for each situation: | ||||||
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Financial Accounting Information for Decisions
Authors: John J. Wild
9th edition
1259917045, 978-1259917042
