Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $165.000 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 S1, FVAD of $1 and PVAD O SD) (Use appropriate factor(s) from the tables provided.) Situation 2 1 101 124 Lease term (years) Lessor's and lessee's interest rate Residual value: Estimated fair value Guaranteed by lessee 0 $63,000 $9,300 $9,300 $63,000 $73,000 Determine the following amounts at the beginning of the lease (Round your intermediate and final answer to the nearest whole dollar amount.): Answer is complete but not entirely correct. Situation 12 The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease payable 990,000 990,000 790,480 $ 990,000 1,053,000 791,706 $ 1,155,000 1,164,300 868,011 1.155,000 1,218,000 896,721 990,000 790,480 790,480 990,000 759,788 759,788 1,155,000 863,039 863,039 1,155,000 863,039 X 863,039

Answer 1

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			Situations
			3	4
A	The Lessor’s:
	1	Lease payments	1155000	1228000
	2	Gross investment in the lease	1164300	1228000
	3	Net investment in the lease	910264	879869
B	The lessee’s:
	4	Lease payments	1155000	1228000
	5	Right-of-use asset	905177	879869
	6	Lease payable	905177	879869

Situation 3

Lease payments = (165000*7) = 1155000

Gross investment in the lease = (165000*7)+9300 = 1164300

Net investment in the lease = (165000*5.48592)+(9300*0.54703)= 910264

Right-of-use asset = (165000*5.48592) = 905177

Lease payable = (165000*5.48592) = 905177

Present value annuity due factor of $1 @ n= 7 , i=9% = 5.48592

Present value factor of $1 @ n= 7 , i=9% = 0.54703

Situation 4

Lease payments = (165000*7)+73000= 1228000

Gross investment in the lease = (165000*7)+73000= 1228000

Net investment in the lease = (165000*5.23054)+(73000*0.23054)= 879869

Right-of-use asset = (165000*5.23054)+(73000*0.23054)= 879869

Lease payable = (165000*5.23054)+(73000*0.23054)= 879869

Present value annuity due factor of $1 @ n= 7 , i=11% = 5.23054

Present value factor of $1 @ n= 7 , i=11% = 0.48166