Implicit Interest rate = | 12% pa | |
Implicit Interest rate per Qtr =3% | ||
There will be 20 Qtrly lease payments | ||
out of which the first one will be on the first day of | ||
lease. So 19 payments to be discounted @3% qtrly rate | ||
PVIF factor @3% for 19 periods=(1-1.03^-19)/3%= | 14.3239 |
Finidng PV of Min Lease Payments | |||
DeatislParticulars | Cash flow | PV/PVIF Fcator | PV of Cash flow |
First Lease payment | $ 114,201 | 1.00 | $ 114,201 |
Lease paymnet Q2 to 20 | $ 114,201 | 14.3239 | $ 1,635,799 |
Total : | $ 1,750,000 |
So PV of Min Lease payments = | $ 1,750,000 | ||
Fair Value of Equipment | $ 1,750,000 | ||
Ans 1. | |||
So Min value of lease payments is equal to the fair value of the asset. | |||
The Lease period covers 100% of asset's useful life. | |||
So the lease will be treated as Financial Lease between Lessor Physician's Leasing and Lessee | |||
Mid-South Urlogist's Group. |
Ans 2. | |||
Journal Entry in the book of Physician's Leasing (Lessor) | |||
Date | Account Title | Dr $ | Cr $ |
Jan 1.2021. | Equipment | $ 1,750,000 | |
Cash | $ 1,750,000 | ||
Lease Receivable | $ 1,750,000 | ||
Equipment | $ 1,750,000 | ||
Cash | $ 114,201 | ||
Lease Receivable | $ 114,201 | ||
Apr 1.2021. | Cash | $ 114,201 | |
Lease Receivable | $ 65,127.03 | ||
Interest Income | $ 49,073.97 | ||
Journal Entry in the book of Mid-South Urlogist's Groupg (Lessee) | |||
Date | Account Title | Dr $ | Cr $ |
Jan 1.2021. | Right-to-Use Asset | $ 1,750,000 | |
Lease Payable | $ 1,750,000 | ||
Lease Payable | $ 114,201 | ||
Cash | $ 114,201 | ||
Apr 1.2021. | Lease Payable | $ 65,127.03 | |
Interest Expense | $ 49,073.97 | ||
Cash | $ 114,201.00 |
Problem 15-4 (Algo) Finance/sales-type lease; lessee and lessor (LO15-1, 15-2, 15-3] 5 Rand Medical manufactures lithotripters....
Problem 15-4 (Algo) Finance/sales-type lease; lessee and lessor (LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,260,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (FV $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.) Lease Description: Quarterly lease payments $135,504-beginning of each...
Problem 15-4 Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians’ Leasing purchased a lithotripter from Rand for $2,210,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2018. (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.) Lease Description: Quarterly lease payments $ 156,361—beginning...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $1,920,000 and leased it to Mid-South Urologist Group, INC. On January 1, 2021. Lease Description Quarterly lease payments $115,119-beginning of each period Lease Term 5 years (20 quarters) No residual value; no purchase option Economics life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing rate 8% Fair value of asset $1,920,000 Required 1. How...
11- Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians’ Leasing purchased a lithotripter from Rand for $1,590,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (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.) Lease Description: Quarterly lease payments $ 95,333—beginning of each period Lease term 5 years (20 quarters)...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,710,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (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.) $191,737-beginning of each period 5 years (20 quarters) Lease Description: Quarterly lease payments Lease term No residual value;...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,000,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (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.) Lease Description: Quarterly lease payments $ 130,516—beginning of each period Lease term 5 years (20 quarters) No residual...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,630,000 and leased it to Mid-South Urologists Group, Ic., on January 1, 2021. (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.) Lease Description: 171,628-beginning of each *period 5 years (20 quarters) Quarterly lease payments Lease term No residual value;...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $1,730,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. Evo 51. PV of S1, EVA of $1. PVA Of 51. EVAD of 51 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Lease Description: Quarterly lease payments $122,400-beginning of each period Lease term 5 years (20 quarters) No residual value; no...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $1,940,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (Ey 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.) $116,318-beginning of each period 5 years (20 quarters) Lease Description: Quarterly lease payments Lease term No residual value;...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $2,020,000 and leased it to Mid-South Urologists Group, Inc., on January 1 2021 (FV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of Stand PVAD of S1) (Use appropriate factor(s) from the tables provided.) Lease Description Quarterly lease payments $131,821-beginning of each period 5 years (20 quarters) No residual value no purchase option...