Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $11,000 are payable 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, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) situation 3 1 2 4 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? 6 6 6 6 6 9 7 7 11% 11% 11% 118 0 $4,400 $2,200 $2,200 0 0 0 $4,400 6 none $3,200 n/a $7,200 $1,200 n/a yes no no Determine the following amounts at the beginning of the lease: (Round your final answers to nearest whole dollar.) Situation 1 2 4 A. The lessor's: 1. Lease payments 2 Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4 Lease payments 5. Right-of-use asset 6. Lease payable

Answer 1

The answer for above problem is explained below.

Situahon 1 I 2 a The Lessor's 1. Lease payments $ 66,000 $70,400 $ 70,400 $ 69,200 ($11,000 x6] [[$11,000x6] [#11,000 x6] [$11,000 X6] +($4,400))+ $ 2,200 + ($ 3, 200] + $ 2,200 ] $ 66,000 $ 70,400 $ 70,400 $ 69, 200 2. Croy Investment in the lease $ 46,536 $48,888 $48.888 $48, 247 3. Net Investrvent in the lease [Ref: working note 1]

B . The lessee's | 4. Lease payments $66,000 $66,000 $66,000 $69,200 5. Right-of-use $ 46,536 $46,536 $66,536 l $48,247 Asset 6. Lease payable $46,536 1 $46,536 $46,536 / $ 48, 247

Pv value of Annuity @ 11%, 6years No = 4.2205 And PVIF (11%,6) = 0.5346 $11,000 X 402305 = $ 46, 535.5 A pple § $ 46,536 5 $11,000 * 4.23053 +($4,400 x0.5346] = $48888 And < $11,000 * 4.2305 ] + [ $ 3,200 * 0.5346] = $ 48, 247