Problem 15-9 Lease concepts; sales-type leases; guaranteed and unguaranteed resi
ID: 2530390 • Letter: P
Question
Problem 15-9 Lease concepts; sales-type leases; guaranteed and unguaranteed residual value [LO15-2, 15-6] Each of the four independent situations below describes a sales-type lease in which annual lease payments of $14,500 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 provided.) Situation 4. 4 Lease term (years). Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value 4 4 13% 4 13% 13% 13% 0 $5,800 2,900 Guaranteed by lessee Unguaranteed 0 2,900 $5,800 Purchase option: After (years) Exercise price Reasonably certain? none n/a 7,900 1,900 3,900 n/a no no yes Determine the following amounts at the beginning of the lease: (Round your final answers to nearest whole dollar.) Situation A. The lessor's 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's 4. Lease payments 5. Right-of-use asset 6. Lease payableExplanation / Answer
Situtation 1 2 3 4 A. The Lessor's 1.Lease Payments (Note 1) $ 58,000 $ 63,800 $ 60,900 $ 58,000 2.Gross Investment in lease (Note 2) $ 58,000 $ 63,800 $ 63,800 $ 63,800 3.Net Investment in the lease (Note 3) $ 43,123 $ 46,678 $ 46,678 $ 46,678 B. The lessee's 4.Lease payments $ 58,000 $ 63,800 $ 60,900 $ 58,000 5.Right of use asset (Note 4) $ 43,123 $ 46,678 $ 44,901 $ 43,123 6.Lease Payable $ 43,123 $ 46,678 $ 44,901 $ 43,123 Note 1 Lease payment = Lease terms * Annual Lease Payment + Residula value guaranteed by lessee Situation 1 Lease payment = 14500*4 = $58000 Situation 2 Lease payment = 14500*4 = $58000 + 5800 = $63800 Situation 3 Lease payment = 14500*4 = $58000 + 2900 = $60900 Situation 4 Lease payment = 14500*4 = $58000 Note 2 Gross Investment in the lease = Lease payments + Unguaranteed residula value Situation 1 Gross Investment = $58000 Situation 2 Gross Investment= $63800 Situation 3 Gross Investment= $60900 + 2900 = $63800 Situation 4 Gross Investent= $58000 + 5800 = $63800 Net Investment in the lease Note 3 Net Investment in the lease Situation 1 Present velue of gross Investment (14500* 2.974) = $43123 Situation 2 Present velue of gross Investment (14500* 2.974) +( 5800*0.613) = $46678 Situation 3 Present velue of gross Investment (14500* 2.974) +( 2900*0.613)+ (2900*0.613) = $46678 Situation 4 Present velue of gross Investment (14500* 2.974) + (5800*0.613) = $46678 For Lessee Note 4 Situation 1 Present velue of lease paymnets (14500* 2.974) = $43123 Situation 2 Present velue of lease paymnets (14500* 2.974) + (5800*0.613) = $46678 Situation 3 Present velue of lease paymnets (14500* 2.974) + (2900*0.613) = $44901 Situation 4 Present velue of lease paymnets (14500* 2.974) = $43123