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Determine the amount of the annual lease payments as

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Reference no: EM13482522

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.


 Situation


1 2 3
  Lease term (years) 10    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 $600,000 $980,000 $185,000

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

b. Determine the amount of the annual lease payments as calculated by the amount the lessee would record as a leased asset and a lease liability for above situations.

Reference no: EM13482522

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