Question

Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end 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 3 10 8% 11% Lease term (years) Lessor's rate of return Lessee's incremental borrowing rate Fair value of lease asset 20 6 10% 11% 10% $680,000 $1,020,000 $225,000 9% Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for above situations. (Round your answers to the nearest whole dollar.) Lease Payments 115,470 $ Situation 1 Situation 2 Situation 3 Right-of-use Asset/Lease Payable $ 680,000 1.020,000 Ⓡ$ 225,000

Answer 1

Statement showing claculation of Annual Lease rent payment amount
	Situation
	1	2	3
Fair Vale of Lease Asset	$680,000	$1,020,000	$225,000
Lesser Rate of Return	10%	8%	11%
Lease Term	10 Year	20 Year	6 Year
Cumm Present Value interest Factor of Annuity Due (PVIFA)	6.1446	9.8181	4.2305
Annual Lease rent	$110,666	$103,890	$53,185
( Fair Value of Asset/Cumm PVIFA)

as in question right of use asset is given so i am not calculating it can be calculated by multiplying Annual Lease rent to PVIFA

If any problem in answer please comment