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. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 12 20 3 Lessor's rate of return (known by lessee) 10% 8% 11% Lessee's incremental borrowing rate 11% 9% 10% Fair value of lease asset $650,000 $1,005,000 $210,000 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. (Round your 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 end 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, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 12 20 3 Lessor's rate of return (known by lessee) 10% 8% 11% Lessee's incremental borrowing rate 11% 9% 10% Fair value of lease asset $650,000 $1,005,000 $210,000 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. (Round your answers to the nearest whole dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
| Situation | |||
| 1 | 2 | 3 | |
| Lease term (years) | 12 | 20 | 3 |
| Lessor's rate of return (known by lessee) | 10% | 8% | 11% |
| Lessee's incremental borrowing rate | 11% | 9% | 10% |
| Fair value of lease asset | $650,000 | $1,005,000 | $210,000 |
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. (Round your answers to the nearest whole dollar.)
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