tion, determine the appropriate lease classification by the lessee and indicate why. Situations 1 2 3 4 Lease terms (years) 4 4 4 4 Asset's useful life (years) 6 5 6 6 Asset's fair value $ 44,000 $ 45,000 $ 41,000 $ 38,500 Purchase option that is reasonably certain to be exercised? No Yes No No Annual lease payments Beginning of Year End of Year Beginning of Year End of Year Lessor's implicit rate (known by lessee) 5% 6% 5% 6% Lesse's incremental borrowing rate 5% 5%
tion, determine the appropriate lease classification by the lessee and indicate why. Situations 1 2 3 4 Lease terms (years) 4 4 4 4 Asset's useful life (years) 6 5 6 6 Asset's fair value $ 44,000 $ 45,000 $ 41,000 $ 38,500 Purchase option that is reasonably certain to be exercised? No Yes No No Annual lease payments Beginning of Year End of Year Beginning of Year End of Year Lessor's implicit rate (known by lessee) 5% 6% 5% 6% Lesse's incremental borrowing rate 5% 5%
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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Each of the four independent situations below describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by the lessee and indicate why.
Situations | ||||
1 | 2 | 3 | 4 | |
Lease terms (years) | 4 | 4 | 4 | 4 |
Asset's useful life (years) | 6 | 5 | 6 | 6 |
Asset's fair value | $ 44,000 | $ 45,000 | $ 41,000 | $ 38,500 |
Purchase option that is reasonably certain to be exercised? | No | Yes | No | No |
Annual lease payments | Beginning of Year | End of Year | Beginning of Year | End of Year |
Lessor's implicit rate (known by lessee) | 5% | 6% | 5% | 6% |
Lesse's incremental borrowing rate | 5% | 5% | 5% | 5% |
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