Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $10,000 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)		4			4			4			4
Asset’s useful life (years)		4			5			5			7
Lessor’s implicit rate (known by lessee)		11	%		11	%		11	%		11	%
Residual value:
Guaranteed by lessee		0		$	4,000		$	2,000			0
Unguaranteed		0			0		$	2,000		$	4,000
Purchase option:
After (years)		none			3			4			3
Exercise price		n/a		$	7,000		$	1,000		$	3,000
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. Lease payments $40,000 $44,000 $44,000 2. Gross investment in the lease 40,000 44,000 44,000 3. Net investment in the lease 34,437 37,072 B. The lessee’s: 4. Lease payments 40,000 40,000 5. Right-of-use asset 34,437 34,437 6. Lease payable 34,437 34,437

This is what I have so far. The missing blanks are the answers i can't get.

PLEASE SHOW WORK SO I CAN UNDERSTAND HOW TO COMPLETE THE QUESTIONS. THANKS. :)

Answer 1

	Situation
	1	2	3	4
A. The Lessor's
1. Lease Payments	40000	44000	44000	40000
2. Gross Investment in the lease	40000	44000	44000	44000
3.Net Investment in the lease	34437	37072	41024	41024
The lessee's
4.Lease payments	40000	44000	40000	40000
5. Right of use assets	34437	37072	34437	34437
6. Lease Payable	34437	37072	34437	34437
Situation 4
Lease payment   = Lease terms * Annual Lease Payment
Lease apyment = 10000*4 = $40000
Gross Investment in the lease Lease payment + Unguaranteed residual value
Gross Investment in the lease = 40000+4000 = $44000
Net Investment in the lease
Present velue of gross Investment (10000* 3.4437) +(10000*0.6587)
Net Investment = 34437 + 6587     = 41024
Situation 3
Net Investment in the lease
Present velue of gross Investment (10000* 3.4437) +(10000*0.6587)
Net Investment = 34437 + 6587     = 41024
For Lessee
Situation 2
Right of use assets
Present value of minimum lease payments
(10000*3.4437) + (4000*0.6587)
37072
Situation 4
Right of use assets
Present value of minimum lease payments
(10000*3.4437)
34437