Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $16,500 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 5 5 12% 6 12% O Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: After (years) Exercise price Reasonably certain? $6,600 0 $3,300 $3,300 0 $6,600 3 none n/a n/a $8,300 $2,300 no $4,300 yes no Determine the following amounts at the beginning of the lease: (Round your final answers to nearest whole dollar.) Situation 2 3 $ 82,500 82,5001 66,616 82,500 89,100 82,500 89,100 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 82,500 82,500 82,500

All of the answers in there are correct. I have gotten this question closed several times. Can someone please figure it out?

Answer 1

			Situations
			1	2	3	4
A	The Lessor’s:
	1	Lease payments	82500	89100	85800	53800
	2	Gross investment in the lease	82500	89100	70400	60400
	3	Net investment in the lease	66616	70361	70361	52144
B	The lessee’s:
	4	Lease payments	82500	89100	85800	53800
	5	Right-of-use asset	66616	70361	68489	47446
	6	Lease payable	66616	70361	68489	47446

Lease payments

Situation 1 = 16500*5= 82500

Situation 2 = (16500*5)+6600 = 89100

Situation 3 = (16500*5)+3300 =85800

Situation 4 = (16500*3)+4300 = 53800

Gross investment in the lease

Situation 1 = 82500

Situation 2 = 89100

Situation 3 = 85800+3300 = 89100

Situation 4 = 53800+6600 = 60400

Net investment in the lease

Situation 1 = 16500*4.03735= 66616

Present value of annuity due of $1 of n= 5, i = 12% = 4.03735

Situation 2 = (16500*4.03735)+(6600*0.56743) =70361

Present value of $1 of n= 5, i = 12% = 0.56743

Situation 3 = (16500*4.03735)+(6600*0.56743) =70361

Situation 4 = (16500*2.69005)+(10900*0.71178) = 52144

Present value of annuity due of $1 of n= 3, i = 12% = 2.69005

Present value of $1 of n= 3, i = 12% = 0.71178

Right-of-use asset

Situation 1 = 66616

Situation 2 = 70361

Situation 3 = (16500*4.03735)+(3300*0.56743)=57207

Situation 4 = (16500*2.69005)+(4300*0.71178) = 47446