Below describes a sales-type lease in which annual lease payments of $10,000 are

Question

Below describes a sales-type lease in which annual lease payments of $10,000 are payable at the beginning of each year. Below is a finance lease for the lessee.

Lease term (years) : 4 years

Asset’s useful life (years) : 7 years

Lessor’s implicit rate (known by lessee) : 11%

Guranteed residual value by lessee : -

Unguaranteed residual value : $4,000

Purchase option after 3 years

Purchase option, exercise price : $3,000

Purchase option, reasonably certain? : yes

Complete the following and show solutions:

A. The Lessor

1. Lease payments

2. Gross investment in the lease

3. Net investment in the lease

B. The Lessee

4. Lease payments

5. Right of use asset

6. Lease payable

5 Each of the four independent situations below describes a sales-type lease in which annual lease payments of $10,000 are payable at the beginning of each year. Each is a finance lease for the lessee. (EV of , PV of$1. EVA of $1. PVAof $1. PVAD of and PVAD ofs) (Use appropriate factor(s) from the tables provided.) 20 points Lease tern (yeers) Asset's useful 1ife (years) esson's inplicit rate (known by esse9) 11% 11% 11% 11% Residual value Guaranteed by lessee $4,eee 2,e8 e $2,0 4,000 Purchase option After (years) Exercise price Reasonably certain? n/a Determine the following amounts at the beginning of the lease (Round your final answers to nearest whole doller.) A. The lassors: 1. Lesse payments 40,000 3 44,000 44.000 44.000 nvestment in the lesse 40,000 44.000 3. Net investment in the lease 34437 cssce 4. Lesse payments 40,000 34.437 4,437 40.000 34.437 4,437 . Right-of-use a5set Lease payabie Please show work so I can figure out how you got your answers. the missing blanks are the answers l still need to figure out.

Explanation / Answer

A. The Lessor:

  1. Lease payments :

Recievable from Purchase Option

43000

2. Gross investment in the lease :

3. Net investment in the lease :

35852.7

B. The Lessee :

4. Lease payments :

5. Right of use asset :

Yes.

6. Lease payable:

Present Value Of All Lease Payments = $10000*3.1024= $31024.21

Present Value Factors @11% Implicit Rate

Lease Payments $ Periodical Lease Payments (10000*4) 40000

Recievable from Purchase Option

3000 Total-

43000

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