Situation 1 3 4 2 4 4 4 4 $44,000 $45,000 $41,000 $38,000 Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate No Beg. of yr. 5% Yes End of yr. 6% Beg. of yr. End of yr. 6% 5% 5% 5% Each of the four independent situations above describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee. (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 Lease Classification