Each of the four independent situations below describes a sales-type lease in which annual lease payments of $10,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: After (years) Exercise price Reasonably certain? A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset 6. Lease liability $ 1 Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest whole dollar. 2 1 Situation 4 4 118 40,000 $ 40,000 $ 40,000 44,000 34,437 $0 $0 none 3 2 Situation $ 4,000 $0 40,000 $ 44,000 4 5 118 3 $ 7,000 no 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) 4 3 33,000 37,000 4 5 118 $ 2,000 $ 2,000 $ 1,000 no 4 4 7 11% $0 $ 4,000 3 $ 3,000 yes

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $10,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: After (years) Exercise price Reasonably certain? A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset 6. Lease liability $ 1 Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest whole dollar. 2 1 Situation 4 4 118 40,000 $ 40,000 $ 40,000 44,000 34,437 $0 $0 none 3 2 Situation $ 4,000 $0 40,000 $ 44,000 4 5 118 3 $ 7,000 no 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) 4 3 33,000 37,000 4 5 118 $ 2,000 $ 2,000 $ 1,000 no 4 4 7 11% $0 $ 4,000 3 $ 3,000 yes

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Each of the four independent situations below describes a sales-type lease in which annual lease payments a at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 7 7 8 Lessor's and lessee's interest rate Residual value: 8 128 98 11% 10% Estimated fair value 0 $50,000 $8,000 $50,000 Guaranteed by lessee 0 0 $8,000 $60,000 Determine the following amounts at the beginning of the lease. (Round your intermediate and final answers dollar amount.) Situation 2 A The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease payable B
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The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term Lease term Economic life of leased equipment Fair value of asset at January 1, Lessor's implicit rate Lessee's incremental borrowing rate January 1, $126,840 $55,000 $50,000 6 years 6 years $653,000 9 % 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.
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…