Describes a capital lease in which annual lease payments

Reference no: EM131025332

Each of the three independent situations below describes a capital 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)	12	20	4
Lessor’s rate of return (known by lessee)	11%	9%	12%
Lessee’s incremental borrowing rate	12%	10%	11%
Fair value of leased asset	$620,000	$1,000,000	$205,000

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.

Reference no: EM131025332

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