Exercise 15-1 (Static) Lease classification [LO15-1] Situation 1 2 3 4 Lease term (years) Asset's useful life (years) Asset's fair value 4 4 4 4 6 5 6 6 $44,000 $45,000 $41,000 $38,000 Purchase option that is reasonably certain to be exercised? No Annual lease payments Beg. of yr. Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate 5% 5% Yes End of yr. 6% No Beg. of yr. 5% No End of yr. 6% 5% 5% 5% Each of the four independent situations above 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.)