Question

Each of the four independent situations below describes a sales-type lease in which annual lease payments...

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $160,000 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) 9 9 10 10 Lessor's and lessee's interest rate 9% 11% 10% 12% Residual value: Estimated fair value 0 $62,000 $9,200 $62,000 Guaranteed by lessee 0 0 $9,200 $72,000 Determine the following amounts at the beginning of the lease (Round your intermediate and final answer to the nearest whole dollar amount.):

Homework Answers

Answer #1
Situation 1 2 3 4
Lease term (years) 9 9 10 10
Lessor’s rate of return 9% 11% 10% 12%
Fair value of leased asset A 0 62000 9200 62000
Lessor’s cost of leased asset 0 62000 9200 62000
Residual value:
Guaranteed by lessee 0 0 9200 72,000
Unguaranteed 0 0 0 0
PVAD $1 B 6.53482 6.14612 6.75902 3.40183
PV $1 C 0.46 0.391 0.386 0.636
Amount to be recovered(fair value) 0 62000 9200 62000
Less: Present value of the residual value 0 0 3551.2 45792
Amount to be recovered through periodic lease payments D=C*A 0 62000 5648.8 16208
Lease payments at beginning D/B $ 0 $ 10,088 $ 836 $ 4,764
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