Check my work 2 Problem 15-9 Lease concepts; sales-type leases; guaranteed and u
ID: 2530603 • Letter: C
Question
Check my work 2 Problem 15-9 Lease concepts; sales-type leases; guaranteed and unguaranteed residual value [LO15-2, 15-6) 0.66 points Each of the four independent situations below describes a sales-type lease in which annual lease payments of $18,500 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 eBook Lease term (years) Asset 's useful life (years) Lessor's implicit rate (known by lessee) 11% 11% 11% 11% Print Residual value: 0 $7,400 $3,700 Guaranteed by lessee Unguaranteed 0 $3,700 7,400 Purchase option: References After (years) Exercise price Reasonably certain? n/a 8,700 $2,700 $4,700 yea 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 p 2. Gross investment in the lease 3. Net investment in the lease $55,500 55,500 62,900 62,900 60,200 62,900 62.900 60.200 B. The lessee's 55,500 55.500 55,500 4. Lease payments 5. Right-of-use asset 6. Lease paya bleExplanation / Answer
The PV of the lease payments is computed as:
18500 + 18500/(1+11%) + 18500/(1+11%)2 = 50182
The rate of interest for the Lessee is unavailable, hence it is assumed at 11%.
The Lessor 1 2 3 4 A. Lease Payments 18,500 18,500 18,500 18,500 B. Guaranteed Residual Value - 7,400 3,700 - C. Unguaranteed Residual Value - - 3,700 7,400 D. Lease Term 3 3 3 3 E. Implicit Interest Rate 0 0 0 0 F. PV of Lease Payments 50,182 50,182 50,182 50,182 G. PV of Unguarantted Residual Value (C/(1+11%)3) - - 2,705 5,411 H. Unearned Finance Income (I-F+G) 5,318 5,318 6,313 7,307 I. Gross Investment in Lease ((A*D) + C) 55,500 55,500 59,200 62,900 J. Net Investment in Lease (I-H) 50,182 50,182 52,887 55,593