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D) dr.rent expense $4,000 Difficulty: Medium Level of Learning: Application HỊvic III 76. Lessee ABC leased from Lessor ORS a machine that cost $35.000, which was properly classified as a finance case by both parties. Assume the lessor used a 12 percent implicit intestate and that the lessee was informed of that rate. The lease did not include a bargain purchase option and the estimated residual value al termination of the lease was zero. Equal semiannual lease payments are to be made at the start of each wach period, including one on the date the lease was signed. The amount of each semi-annual payment, assuming a five-year lease term, would be A) $2,074 B) 52916 c) $4.486 D) $44.95 E) 59,709 Difficulty: Medium Level of Learning: Application Topic: 102 Fifth Editio. Vol. 2 Becky, Card & Farrell Insermediate Copyright 2011 McCaw-Hill Ryeon Limited Page 17 Chapter 17 - L es 77. The following information relates to a lease contract Inception: 1/11 Annual lease payments of .000 de cach 12/31 beginning 12/31/1 End of lease term: 115 There we lease payments in all Useful life of antinception 10 yrs Exped residual value 1 000 Les is given option to purchase a stat 1/125 for 1.000 Using an interest rate of 10%, what is the present value of minimum lease payments for the lessee A S10193 $ 9,510 B) E) SI 3.000 Difficulty Medium Level of Learning: Application Topic: LOZ 78. A lesser and lesse enter into a la remont with the following characteristics Inception 11/20 6 annual lease payments of $10,000 me due cach Jan. I beginning 1 End of lease 1235 Book value of equipment under lease, inception $35.000 Market value of equipment under lease at inception Remaining useful life of equipment at inception Expected residual value at end of lase term

Answer 1

76.

Value of machine = $35,000

Period of lease = 5 years

Lease rentals are payable semi annually at the beginning

Interest Rate = 12%

Lease Rentals = Value of Machine / (Annuity factor of 6% for 9 periods + 1)

= $35,000 / (6.802 + 1)

= $35,000 / 7.802

= $4,486

77.

Annual lease payments = $3,000

Period of lease = 4 years

Purchase value after 4 years = $1,000

Interest rate = 10%

Present value of minimum lease payments = (Annual lease rentals * Annuity factor of 10% for 4 years) + (Purchase value after 4 years * Discounting factor of 10% after 4 years)

Present value of minimum lease payments = ($3,000 * 3.170) + ($1000 * 0.683)

= $9,510 + $683

= $10,193