Question
In: Accounting
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000....
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000.
|
Situation 1 |
Situation 2 |
Situation 3 |
Situation 4 |
|
|
Lease term (years) |
4 |
4 |
4 |
4 |
|
Asset's useful life (years) |
6 |
6 |
5 |
6 |
|
Asset's fair value |
$132,000 |
$114,000 |
$129,000 |
$115,000 |
|
Bargain purchase option? |
No |
No |
Yes |
No |
|
Annual lease payments |
Beg. of yr. |
End of yr. |
Beg. of yr. |
End of yr. |
|
Lessor's implicit rate (known by lessee) |
5% |
6% |
6% |
5% |
|
Lessee's incremental borrowing rate |
5% |
5% |
5% |
5% |
Required: For each situation, determine the appropriate lease classification by the lessee and indicate why. Round your answers to the nearest whole dollar amounts.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000....
Each of the four independent situations below describes a lease
requiring annual lease payments of $30,000.
Situation 1
Situation 2
Situation 3
Situation 4
Lease term (years)
4
4
4
4
Asset's useful life (years)
6
6
5
6
Asset's fair value
$132,000
$114,000
$129,000
$115,000
Bargain purchase option?
No
No
Yes
No
Annual lease payments
Beg. of yr.
End of yr.
Beg. of yr.
End of yr.
Lessor's implicit rate (known by lessee)
5%
6%
6%
5%
Lessee's incremental...
Each of the four independent situations below describes a lease requiring annual requiring annual lease payments...
Each of the four independent situations below describes a lease
requiring annual requiring annual lease payments of $30,000.
Situation
1
2
3
4
Lease term (years)
4
4
4
4
Asset's Useful Life (years)
6
6
5
6
Asset's fair value
$132,000
$123,000
$129,000
$117,00
Bargain Purchase option?
no
no
yes
no
Annual lease payments
Beg. of yr.
Beg. of yr.
End of yr.
End of yr.
Lessor's implicit rate (known by the lessee)
5%
5%
7%
6%
Lessee's incremental...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four 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. (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)
4
7
5
8
Lessor's rate of return
10
%
11...
Each of the four independent situations below describes a capital lease in which annual lease payments...
Each of the four independent situations below describes a
capital lease in which annual lease payments are payable at the
beginning of each year. (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) 6 9 7 10
Lessor’s rate of return 10 % 11 % 9 % 12 % Fair value of leased
asset $...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four 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. (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) 6 9 7 10
Lessor's rate of return 9 % 10...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four 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. (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)
4
7
5
8
Lessor's rate of return
10
%
11...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four 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. (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)
5
8
6
9
Lessor's rate of return
10
%
11...
Each of the four independent situations below describes a sales-type lease in which annual lease payments...
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...
Each of the four independent situations below describes a sales-type lease in which annual lease payments...
Each of the four independent situations below describes a
sales-type lease in which annual lease payments of $19,500 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)
5
5
5
5
Asset’s useful life (years)
5
6
6
8...
Each of the four independent situations below describes a sales-type lease in which annual lease payments...
Each of the four independent situations below describes a
sales-type lease in which annual lease payments of $145,000 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)
6
6
7
7
Lessor's and lessee's interest rate
11%
10%
12%...
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