A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 7%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $144,000. Required: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization table through the second payment on January 1, Year 2. c. What would be the increase in earnings that the lessor would report in its income statement for the first year ended December 3 (ignore taxes)? 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) Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Note: Round your answers to nearest whole number and round percentage answer to 1 decimal place. PV factors based on Table or Calculator function: Lease Payment PV of Lease n =
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 7%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $144,000. Required: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization table through the second payment on January 1, Year 2. c. What would be the increase in earnings that the lessor would report in its income statement for the first year ended December 3 (ignore taxes)? 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) Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Note: Round your answers to nearest whole number and round percentage answer to 1 decimal place. PV factors based on Table or Calculator function: Lease Payment PV of Lease n =
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...
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Step 1: Introduction to concept of lease and PV od annuity due
VIEWStep 2: (a) Determination of price at which the lessor is "selling" the asset:
VIEWStep 3: (b) Calculation of a partial amortization table through the second payment on January 1 , Year 2:
VIEWStep 4: (c) Determination of the increase in earnings that the lessor would report in its income statement:
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