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Other Objective Format and Other Problem/Computation Questions (Homework) Lessee - Finance Lease (Homework Problem E): Question #'s 83 through 91 (30-40 minutes) On 1/1/17, a

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Other Objective Format and Other Problem/Computation Questions (Homework) Lessee - Finance Lease (Homework Problem E): Question #'s 83 through 91 (30-40 minutes) On 1/1/17, a lessee (tenant) signed a noncancellable net lease with a lessor to use the lessor's equipment. The following data pertain to this lease: . Lease term is 3 years. . - interest 6 is kn th 0.6830 0.7513 0.7722 Annual lease payments = $1,000 each, payable 1/1/17, 12/31/17, 12/31/18. Estimated economic useful life of the leased equipment is 4 years. Estimated residual value of the equipment on 12/31/19 = $500. Executory costs = $100 for taxes, paid with each lease payment. Fair value of leased equipment at the inception of the lease = $2,900. Lessee has option to purchase the equipment on 12/31/19 for $100 Lessee's incremental borrowing rate is 9% Lessor's implicit interest rate in the lease is 10% and is known to the lessee. The leased equipment has no alternative use to the lessor at the end of the lease term. Additional data: (round all numerical answers to the nearest whole dollar) 3 periods 4 periods Present value (PV) of 1 at 10% PV of 1 at 9% 0.7084 PV of an annuity due of 1 at 10% 2.7355 3.4866 PV of an annuity due of 1 at 9% 2.7591 3.5313 PV of an ordinary annuity of 1 at 10% 2.4869 3.1699 PV of an ordinary annuity of 1 at 9% 2.5313 3.2397 Required: Answer question #'s 83 through 91, which follow, using the above data: 183. What is the amount of the present value of lease payments used in the lease classification test? 84. According to ASC Topic 842, how should the lessee classify this lease? 85. What is the reasoning for this lease dassification? 86. What is the amount of the present value of the lease payments used in determining the lessee's lease liability at the commencement of the lease? 87. Prepare an amortization table for the lease liability/principal using the effective interest method. 88. Prepare a lease expense schedule for the lease as appropriate. 89. Prepare the lessee's journal entries at the inception of the lease (1/1/17). 90. Prepare the lessee's journal entries during the lease (12/31/17 and 12/31/18). 91. Prepare the lessee's journal entries at the end of the lease (12/31/19). Page 320 - 31 L

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