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. (EV of $1. PV of $1. EVA 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 10 11% 12% $780,000 Situation 2 20 9% 10% $1,160,000 3 6 12% 11% $365,000 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. 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. (EV of $1. PV of $1. EVA 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 10 11% 12% $780,000 Situation 2 20 9% 10% $1,160,000 3 6 12% 11% $365,000 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. the nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F74df7dc6-39ed-476f-9b4a-f68366579151%2Fd8c444cc-c4de-4d40-b23b-65cc0f3dad21%2Fll8j5ke_processed.jpeg&w=3840&q=75)
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.
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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