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Determine the amount of the annual lease payments

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Reference no: EM132827453

Question - Each of the three independent situations below describes a finance 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.

Situation 1 2 3

Lease term (years) 1 12 15

Lessor's rate of return (known by lessee) 10% 8% 11%

Lessee's incremental borrowing rate 11% 9% 10%

Fair value of lease asset $700,000 $1,080,000 $285,000

Required - Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for above situations.

Reference no: EM132827453

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