Each of the three Independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's Implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provlded.) Situation 2 3 Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset 10 20 5 11% 9% 12% 12% 10% 11% $720,000 $1,100,000 $305,000 Requlred: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease llability, for each of the above situations. (Round your answers to the nearest whole dollar.) Right-of-use Asset/Lease Payable Lease Payments Situation 1 Situation 2 Situation 3

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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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Each of the three Independent situations below describes a finance lease in which annual lease payments are payable at the
beginning of each year. The lessee is aware of the lessor's implicit rate of return. (FV of $1, PV of $1, EVA of $1, PVA of $1, EVAD of $1
and PVAD of $1) (Use approprlate factor(s) from the tables provided.)
Situation
1
2
Lease term (years)
Lessor's rate of return (known by lessee)
Lessee's incremental borrowing rate
Fair value of lease asset
10
20
11%
9%
12%
12%
10%
11%
$720,000
$1,100,000
$305,000
Requlred:
a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a
right-of-use asset and a lease llability, for each of the above situatlons. (Round your answers to the nearest whole dollar.)
Right of-use Asset/Lease
Payable
Lease Payments
Situation 1
Situation 2
Situation 3
Transcribed Image Text:Each of the three Independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. (FV of $1, PV of $1, EVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provided.) Situation 1 2 Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset 10 20 11% 9% 12% 12% 10% 11% $720,000 $1,100,000 $305,000 Requlred: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease llability, for each of the above situatlons. (Round your answers to the nearest whole dollar.) Right of-use Asset/Lease Payable Lease Payments Situation 1 Situation 2 Situation 3
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