Each of the four independent situations below describes a lease requiring annual lease payments of $10,000....

  

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Each of the four independent situations below describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by 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) Asset's useful life (years) 4 4 4 4 6. 6. 6. Asset's fair value $44,000 $45,000 $41,000 $38,000 Purchase option that is reasonably certain to be exercised? No Yes No No End of yr. End of yr. Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Beg. of yr. Beg. of yr. 5% 6% 5% 6% 5% 5% 5% 5% Situation Lease Classification 1. 2. 3. 4. Each of the four independent situations below describes a lease requiring annual lease payments of $10,000. For each situation, determine the appropriate lease classification by 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) Asset's useful life (years) 4 4 4 4 6. 6. 6. Asset's fair value $44,000 $45,000 $41,000 $38,000 Purchase option that is reasonably certain to be exercised? No Yes No No End of yr. End of yr. Annual lease payments Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Beg. of yr. Beg. of yr. 5% 6% 5% 6% 5% 5% 5% 5% Situation Lease Classification 1. 2. 3. 4.

Answer rating: 100% (QA)

Scenario a Transfer of title to the lessee b Option of a bargain purchase c Lease term 75 of economi... View the full answer