Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $15,500 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)		3			3			3			3
Asset’s useful life (years)		3			4			4			6
Lessor’s implicit rate (known by lessee)		10	%		10	%		10	%		10	%
Residual value:
Guaranteed by lessee		0		$	6,200		$	3,100			0
Unguaranteed		0			0		$	3,100		$	6,200
Purchase option:
After (years)		none			2			3			3
Exercise price		n/a		$	8,100		$	2,100		$	4,100
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.)

Answer 1

Situation-1
Year	Lease Payment ($)	Implicate Rate @ 10%	Pressent Value of Lease Payment ($)
1	15500	1	15500
2	15500	0.9091	14091
3	15500	0.8264	12810
	Total Lease liablity		42401

Situation-2
Year	Lease Payment ($)	Implicate Rate @ 10%	Pressent Value of Lease Payment ($)
1	15500	1	15500
2	15500	0.9091	14091
3	15500	0.8264	12810
3	6200	0.8264	5124	Guranteed residual value
	Total Lease liablity		47525

Situation-3
Year	Lease Payment ($)	Implicate Rate @ 10%	Pressent Value of Lease Payment ($)
1	15500	1	15500
2	15500	0.9091	14091
3	15500	0.8264	12810
3	3100	0.8264	2562	Guranteed residual value
	Total Lease liablity		44963
Year	Unguranteed Residual value	Implicate Rate @ 10%	Pressent Value of unguranted price ($)
3	3100	0.8264	2561.84
	Total Lease liablity    =	Present value of Lease payment+present value of unguarnted residual value
	=	44963+2562
	=	$47525

Situation-4
Year	Lease Payment ($)	Implicate Rate @ 10%	Pressent Value of Lease Payment ($)
1	15500	1	15500
2	15500	0.9091	14091
3	15500	0.8264	12810
			42401
Year	Unguranteed Residual value	Implicate Rate @ 10%	Pressent Value of unguranted price ($)
3	6200	0.8264	5123.68
Total Lease liablity =	Present value of Lease payment+present value of unguarnted price
=	42401+5124
=	$47525
If Purchase option Excercised by the lessee Exercise price =$4100
	Present value of Exercise price =0.8264*4100
	=	$3388.24
		Total Payment to aquire asset =47525+3388
	=	$50913