Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation o

Question

Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5]

Each of the three independent situations below describes a capital lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. (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.)

Determine the amount of the annual lease payments as calculated by the lessor and above situations.

     situation 1

Situation 2

situation 3

Determine the amount lessee would record as a leased asset and a lease liability for above situations.

     situation 1

Situation 2

situation 3

Each of the three independent situations below describes a capital lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. (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.)

Explanation / Answer

Situation 1

a) Annual lease payments = 710000 / 5.889 = $ 120564

b) Leased asset and leased liability = $ 120564 * 5.889 = $ 710000

Situation 2

a)   Annual lease payments = 1090000 / 9.129 = $ 119400

b) Leased asset and leased liability = $ 119400*9.129 = $ 1090000

Situation 3

a) Annual lease payments = 295000 / 3.037 = $ 97135

b) Leased asset and leased liability = $ 97135 * 3.037 = $ 295000

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