Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $100,000 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 1 2 3 4 Lease term (years) 7 7 8 8 Lessor's and lessee's interest rate 9% 11% 10% 12% Residual value: Estimated fair value 0 $50,000 $8,000 $50,000 Guaranteed by lessee 0 0 $8,000 $60,000 Determine the following amounts at the beginning of the lease.

Answer 1

The total amounts at the beginning of the lease for each situation are $553,675.75, $534,442.01, $560,482.58, and $530,815.40.

Step-by-step explanation:

To determine the amounts at the beginning of the lease, we need to calculate the present value of the lease payments and the present value of the residual value. Here are the steps for each situation:

1. Situation 1: Lease term is 7 years and interest rate is 9%. The present value of the lease payments is $553,675.75 ($100,000 * 5.5367575) and the present value of the residual value is $0. The total amount at the beginning of the lease is $553,675.75.
2. Situation 2: Lease term is 7 years and interest rate is 11%. The present value of the lease payments is $499,987.56 ($100,000 * 4.9998756) and the present value of the residual value is $34,454.45 ($50,000 * 0.689089). The total amount at the beginning of the lease is $534,442.01.
3. Situation 3: Lease term is 8 years and interest rate is 10%. The present value of the lease payments is $553,680.06 ($100,000 * 5.5368006) and the present value of the residual value is $6,802.52 ($8,000 * 0.8503165). The total amount at the beginning of the lease is $560,482.58.
4. Situation 4: Lease term is 8 years and interest rate is 12%. The present value of the lease payments is $494,362.75 ($100,000 * 4.9436275) and the present value of the residual value is $36,452.65 ($50,000 * 0.729053). The total amount at the beginning of the lease is $530,815.40.

Answer 2

You can find complete answer and explanation in the attached documents.

Step-by-step explanation: