Determine the amount of the annual lease payments

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Reference no: EM131025790

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.)   

 

Situation

   
 

1

2

3

  Lease term (years)

12   

20   

4  

  Lessor’s rate of return (known by lessee)

11%

9%

12%

  Lessee’s incremental borrowing rate

12%

10%

11%

  Fair value of leased asset

$620,000

$1,000,000

$205,000

 

Required:

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

 

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


Reference no: EM131025790

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