Each of the three independent situations below describes a finance lease in which annual lease payments

Asked by bizgrad
Dated: 9th Feb'18 03:37 PM
Bounty offered: $12.00

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 $1andPVAD of $1)(Use appropriate factor(s) from the tables provided.)

 

Situation

 

1

2

3

Lease term (years)

10

20

6

Lessor's rate of return (known by lessee)

11%

9%

12%

Lessee's incremental borrowing rate

12%

10%

11%

Fair value of lease asset

$790,000

$1,170,000

$375,000



Required:
a. & b. 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.(Round your answers to nearest whole dollar.)

 

 

On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $677,829 over a 4-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 10.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.1 million. (FV of $1,PV of $1,FVA of $1,PVA of $1,FVAD of $1andPVAD of $1)(Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the price at which Builders is “selling” the equipment (present value of the lease payments) at June 30, 2018.
2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2018 (ignore taxes)?
3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018 (ignore taxes)?

(For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.)

 

 

 

Each of the three independent situations below describes a finance lease in which annual lease payments
Answered by bizgrad
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Dated: 9th Feb'18 03:37 PM
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attachments

geor.xlsx (15.67 KB)
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rate     DateBeginning   at endSituationLease