Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $11,500 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)

4 4 4 12% Situation 2 3 4 5 5 12% 12% 4 7 12% $ 4,600 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? $ 2,300 $ 2,300 $4,600 none n/a n/a 3 $ 7,300 no $ 1,300 no 3 $ 3,300 yes Determine the following amounts at the beginning of the lease: (Round your final answers to nearest whole dollar.) Situation 2 3 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

Please do your calculations carefully.

Answer 1

SITUATION 1 2 3 4 A 1 46000 46000 50600 50600 48300 50600 2 37800 42400 33395 3 34929 37960 37960 The Lessor's Total Lease Payments Gross investment in the lease Net investment in he lease The Lessee's Total Lease Payments Right of lease of asset Lease liability B 1 46000 50600 48300 37800 2 34929 37960 36445 30032 3 3 34929 37960 36445 30032

lease Payments Situation 1:- Situation 2 - fitnation 3 : dituntion 4 11500x4 = 46000 11500x4 + 460o Soboo 1500x4 + 2300 = 48300 1500 134 3300 37,00 } Guranteed residua ) value added Cross Investment in lease 1 :- 46000 2 3 So6oo 483001 2300 =50600 3780ot 4600 =42400 44 unguarandeed residnal value adde Net investment 3.102 1 11500* (PVco 1-4 124 = 34929 2 . 34929 + ( 4600X 659) 37960 3 - 34929 + (4600X659) = 37960 4. 115000 20 44 - 7900 x •73) = 3395 Right of use q 옴 Asset Situation 3 = 34929 + 36445 2300 x-659 dituations 27620 + 3700x *73) = 30032 11500X244