The three independent situations below describe a nonoperating lease in which annual lease payments are payable at
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Question:
The three independent situations below describe a nonoperating 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.
Situation | |||
1 | 2 | 3 | |
Lease term (years) | 10 | 20 | 4 |
Lessor's rate of return (known by lessee) | 11% | 9% | 12% |
Lessee's incremental borrowing rate | 12% | 10% | 11% |
The fair value of a leased asset | $600,000 | $980,000 | $185,000 |
Required:
Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a leased asset/liability, for the above situations.
Related Book For
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
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