A lease agreement that qualifies as a finance lease calls for
annual lease payments of $60,000 over a five-year lease term (also
the asset’s useful life), with the first payment at January 1, the
beginning of the lease. The interest rate is 5%. (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.)
Required:
a. Determine the present value of the lease upon
the lease's inception.
b. Create a partial amortization through the first
payment on January 1, 2017.
c. If the lessee’s fiscal year is the calendar
year, what would be the pretax amounts related to the lease that
the lessee would report in its income statement for the first year
ended December 31?
Required. Determine
the present value of the lease upon the lease's inception. (Round
your answers to nearest whole number and round percentage answer to
1 decimal place.)
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PV factors based on |
| Table or
Calculator function: |
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| Lease
Payment |
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| i = |
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| PV of
Lease |
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Create a partial
amortization through the first payment on January 1, 2017. (Enter
all amounts as positive values. Round your answers to nearest whole
number.)
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Date |
Lease Payment |
Effective Interest |
Decrease in balance |
Outstanding balance |
| 01/01/2016 |
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| 01/01/2016 |
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| 01/01/2017 |
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If the lessee’s fiscal
year is the calendar year, what would be the pretax amounts related
to the lease that the lessee would report in its income statement
for the first year ended December 31? (Round your answers to
nearest whole number.)
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| Impact on
pretax income related to the lease: |
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| Total
expenses |
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