Problem 15-16

Problem 15-16 - Problem 15-16 Lessee-guaranteed residual...

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Problem 15-16 Lessee-guaranteed residual value; third-party- guaranteed residual value; unguaranteed res 1 4 yrs out of 5 yrs > 75% of the life of the leased asset Yes, it's a capital lease to lessee 2 Discount rate --lessor generally uses its own interest (implicit/desired) rate (in this case = 10%) --lessee uses the lessor's rate if (1) the lessee knows that rate, and (2) the lessor's rate is lower than the lessee's borrowing rate otherwise, the lessee uses its own rate (in this case, the lessee uses 9%) PV of lease payments (11,000 x 3.53129, n=4. i=9%) Less: PV of executory cost (1,000 x 3.53129) Add: PV of guaranteed residual value (6,000 x 0.70843, n=4, i=9%) PV of total MLP 3 Both additional conditions are met. Yes, a cap lease to the lessor. further, it’s a sales-type cap lease since FMV > cost 4 FMV of the leased asset Less: PV of the residual value (15,000 x .68301, n=4, i=10%) amount to be recovered divided by PV of annuity due factor (n=4, i=10%) Lease payments Add: executory cost
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Problem 15-16 - Problem 15-16 Lessee-guaranteed residual...

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