A finance lease situation is most likely when the lease term is equal to or greater than Select one: a. 75% of the expected economic life of the leased asset. b. 90% of the expected economic life of the leased asset. c. 50% of the expected economic life of the leased asset. d. 80% of the expected economic life of the leased asset.

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. 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) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 11 Situation 2 Situation 3 Lease Payments 10 11% 12% Right-of-use Asset/Lease Payable $780,000 Situation 20 9% 10% $1,150,000 3 Required: 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 liability, for each of the above situations. Note: Round your answers to the nearest whole dollar. 6 12% 11% $365,000

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Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 Situation 2 Situation 3 Lease Payments Right-of-use Asset/Lease 1 Payable 10 10% 11% $780,000 Situation 2 15 8% 9% $1,070,000 Required: 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 liability, for each of the above situations. Note: Round your answers to the nearest whole dollar. 3 5 11% 10% $275,000

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am. 127.

If a lease term is more than 80% of the asset’s life and the leased property is transferred from the lessor to the lessee, then the lease must be capitalized and disclosed on a firm’s balance sheet.   Is the preceding statement true or false?   False or True

Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. 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) Lease term (years) Lessor's rate of return Fair value of leased asset. Lessor's cost of leased asset. Purchase option: Exercise price Exercisable at end of year: Reasonably certain? Situation 1 Situation 2 Situation 3 1 Annual lease payments 4 10% $92,000 $ 66,000 $ 26,000 4 yes Situation 2 4 11% $ 436,000 $ 436,000 $ 66,000 4 no 3 3 9% $ 201,000 $ 161,000 yes $ 38,000 2 Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar…

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. 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) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 Situation 2 Situation 3 Lease Payments Right-of-use Asset/Lease 1 Payable 11 10% 11% $730,000 Situation 2 21 8% 9% $1,110,000 Required: 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 liability, for each of the above situations. Note: Round your answers to the nearest whole dollar. 3 4 11% 10% $315,000