CHAPTER 15 Leases 899 (Note: This is a variation of the Exercise 15–12 modified to assume lease payments are at the end of each period.) Each of the three independent situations below describes a capital lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor’s implicit rate of return. E 15–13 Lessor calculation of annual lease payments; lessee calculation of asset and liability ● LO15–5 Situation 1 2 3 Lease term (years) 10 20 4 Lessor’s rate of return 11% 9% 12% Lessee’s incremental borrowing rate 12% 10% 11% Fair value of leased asset $600,000 $980,000 $185,000 Required: For each situation, determine: a. The amount of the annual lease payments as calculated by the lessor. b. The amount the lessee would record as a leased asset and a lease liability. Each of the four independent situations below describes a capital lease in which annual lease payments are payable at the beginning of each year. Determine the annual lease payments for each: Situation 1 2 3 4 Lease term (years) 4 7 5 8 Lessor’s rate of return 10% 11% 9% 12% Fair value of leased asset $50,000 $350,000 $75,000 $465,000 Lessor’s cost of leased asset $50,000 $350,000 $45,000 $465,000 Residual value: Guaranteed by lessee 0 $ 50,000 0 $ 30,000 Unguaranteed 0 0 $ 7,000 $ 15,000 Situation 1 2 3 Lease term (years) 5 12 4 Lessor’s rate of return 12% 11% 9% Fair value of leased asset $60,000 $420,000 $185,000 Lessor’s cost of leased asset $50,000 $420,000 $145,000 Bargain purchase option: Option price $10,000 $ 50,000 $ 22,000 Exercisable at end of year: 5 5 3 E 15–14 Calculation of annual lease payments; residual value ● LO15–5, LO15–6, LO15–8 Each of the four independent situations below describes a direct financing lease in which annual lease payments of $100,000 are payable at the beginning of each year. Each is a capital lease for the lessee. Determine the following amounts at the inception of the lease: A. The lessor’s: 1. Minimum lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee’s: 4. Minimum lease payments 5. Leased asset 6. Lease liability E 15–15 Lease concepts; direct financing leases; guaranteed and unguaranteed residual value ● LO15–5, LO15–6, LO15–8 For each of the three independent situations below determine the amount of the annual lease payments. Each describes a capital lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. E 15–16 Calculation of annual lease payments; BPO ● LO15–5, LO15–6, LO15–7 Situation 1 2 3 4 Lease term (years) 7 7 8 8 Lessor’s and lessee’s discount rate 9% 11% 10% 12% Residual value: Guaranteed by lessee 0 $50,000 0 $40,000 Unguaranteed 0 0 $50,000 $60,000
Spiceland_Inter_Accounting8e_Ch15
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