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Business, 13.03.2020 00:21 tiffanyheist

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. (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) 15 25 5
Lessor's rate of return (known by lessee) 11% 9% 12%
Lessee's incremental borrowing rate 12% 10% 11%
Fair value of lease asset $740,000 $1,120,000 $325,000

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.

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