Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $120,000 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 S1, FVAD of $1 and PVAD of (Use appropriate factor(s) from the tables provided.)

Situation
1 2 3 4
Lease term (years) 9 9 10 10
Lessor's and lessee's interest rate 11$ 13$ 12% 12%
Residual value:
Estimated fair value 0 $54,000 $8,400 $54,000
Guaranteed by lessee 0 0 $8/,400 $64,000
Determine the following amounts at the beginning of the lease Round your intermediate and final answer to the nearest whole dollar amount. Answer the missing part.
Situation
1 2 3 4
A. The lessor's:
1. Lease payments $1,080,000 $1,080,000 $1,200,000 ________
2. Gross investment in the leas $1,080,000 $134,000,000 $1,208,400 1,264,000
3. Net Investment in the lease 737,534 713,828 762,095 779,996
B. The lessee's
4. Lease payments 1,080,000 1,080,000 1,200,000 ________
5. Right-of-use asset 737,534 713,828 759,390 ________
6. Lease payable 737,534 713,828 759,390 ________

Answer 1

A) $1264000

B) 4) $1264000

5) $77996

6) $77996

Step-by-step explanation:

Answer to The missing parts

A) under the Lessor's category

The lease payment for the 4th condition is missing and is calculated as

= ( $120000 * number of payments ) + residual value guaranteed by lessee

=( $120000 * 10 ) + $64000

= 1200000 + 64000 = $1264000

B) Under Lessee's category

4)minimum lease payment for the 4th condition

= ( $120000 * number of payments ) + residual value guaranteed by lessee

=( $120000 * 10 ) + $64000

= 1200000 + 64000 = $1264000

5) Right of use asset for the 4th condition ( this should not exceed fair value = ( $120000 * 6.32825 ) + ( $64000 * 0.32197 )

= $77996

6) Lease payable for the 4th condition ( this should not exceed fair value )

= ( $120000 * 6.32825 ) + ( $64000 * 0.32197 )

= $77996