Each of the four independent situations below describes a direct financing lease in which annual...
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Accounting
Each of the four independent situations below describes a direct financing lease in which annual lease payments of $16,500 are payable at the beginning of each year. Each is a capital lease for the lessee.
Situation
1
2
3
4
Lease term (years)
5
5
5
5
Assets useful life (years)
5
6
6
6
Lessors implicit rate (known by lessee)
11
%
11
%
11
%
11
%
Lessees incremental borrowing rate
11
%
12
%
11
%
12
%
Residual value:
Guaranteed by lessee
0
$
5,300
0
0
Guaranteed by third party
0
0
$
5,300
0
Unguaranteed
0
0
0
$
5,300
Determine the following amounts at the inception of the lease:
.
The lessors:
1.
Minimum lease payments
$82,500
87,800
87,800
82,500
2.
Gross investment in the lease
82,500
87,800
87,800
87,800
3.
Net investment in the lease
B.
The lessees:
4.
Minimum lease payments
5.
Leased asset
6.
Lease liability
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