Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $17,000 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
		1			2			3			4
Lease term (years)		2			2			2			2
Asset’s useful life (years)		2			3			3			5
Lessor’s implicit rate (known by lessee)		13	%		13	%		13	%		13	%
Residual value:
Guaranteed by lessee		0		$	6,800		$	3,400			0
Unguaranteed		0			0		$	3,400		$	6,800
Purchase option:
After (years)		none			1			2			3
Exercise price		n/a		$	8,400		$	2,400		$	4,400
Reasonably certain?		n/a			no			no			yes

Determine the following amounts at the beginning of the lease: (Round your final answers to nearest whole dollar.)

	Situation 1 2 3 4 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

Answer 1

page | Given data Each of fough Independent situation below descopibe the sale type lease in which Annual lease payments of $14,000 Detegmine the following begining of Lease Amounts at the Situation Q 3 4 $40800 $37400 $38400 The less098: 1. Total lease $34000 payments ac G400s Inves $34000 tment in the $40800 $40800 $40800 lease $32040 $38060 $38060 $38060 3 Net Invest ment in the leade

page 2 $34000 $40800 $37400 $38400 B. The lessee's; | 40 Total lease payments 5. Bight of use Asset 6. Gease liabilty $32040 $38060 $35050 $35930 $35930 $32040 $38060 | $35050