# Chapter 15 Homework Solutions - INTM ACCT CH 15 ANSWERS...

• Homework Help
• 40

This preview shows page 1 - 6 out of 40 pages.

INTM ACCT CH 15 ANSWERSExercise 15-11Situation 1(a)\$600,000 ÷ 5.88923** = \$101,881fairleasevalue payments** present value of an ordinary annuity of \$1: n=10, i=11%(b)\$101,881x 5.88923** = \$600,000* leaseleased asset/paymentslease liability* rounded** present value of an ordinary annuity of \$1: n=10, i=11%(a)\$185,000 ÷ 3.03735** = \$60,908fairleasevalue payments** present value of an ordinary annuity of \$1: n=4, i=12%(b)\$60,908x 3.10245** = \$188,964leaseleased asset/paymentslease liability** present value of an ordinary annuity of \$1: n=4, i=11%But since this amount exceeds the asset’s fair value,the lessee must capitalize the \$185,000fair valueinstead.
Situation 2(a)\$980,000 ÷ 9.12855** = \$107,355fairleasevalue payments** present value of an ordinary annuity of \$1: n=20, i=9%(b)\$107,355x 9.12855** = \$980,000leaseleased asset/paymentslease liability** present value of an ordinary annuity of \$1: n=20, i=9%rounded for convenienceSituation 3
INTM ACCT CH 15 ANSWERSExercise 15-12Situation 1Amount to be recovered (fair value) \$50,000___________________Lease payments at the beginning of each of the next 4 years: (\$50,000 ÷ 3.48685**)\$ 14,340** present value of an annuity due of \$1: n=4, i=10%Situation 2Amount to be recovered (fair value) \$350,000Less:Present value of the residual value (\$50,000 x .48166*)(24,083)Amount to be recovered through periodic lease payments\$325,917_______________________Lease payments at the beginning of each of the next 7 years: (\$325,917 ÷ 5.23054**)\$ 62,310* present value of \$1: n=7, i=11%** present value of an annuity due of \$1: n=7, i=11%
INTM ACCT CH 15 ANSWERSExercise 15-12 (concluded)Situation 3Amount to be recovered (fair value) \$75,000Less:Present value of the residual value (\$7,000 x .64993*)(4,550Amount to be recovered through periodic lease payments\$70,450______________________Lease payments at the beginning of each of the next 5 years: (\$70,450 ÷ 4.23972**)\$ 16,617* present value of \$1: n=5, i=9%** present value of an annuity due of \$1: n=5, i=9%Situation 4Amount to be recovered (fair value) \$465,000Less:Present value of the residual value (\$45,000 x .40388*)(18,175Amount to be recovered through periodic lease payments\$446,825______________________Lease payments at the beginning of each of the next 8 years: (\$446,825 ÷ 5.56376**)\$ 80,310* present value of \$1: n=8, i=12%** present value of an annuity due of \$1: n=8, i=12%
)
)
INTM ACCT CH 15 ANSWERSExercise 15-13Situation1234A.The lessor’s:1.Minimum lease payments1\$700,000\$750,000\$800,000\$840,0002.Gross investment in the lease2700,000750,000850,000900,0003.Net investment in the lease3548,592547,137610,168596,764B.The lessee’s:4.Minimum lease payments4700,000750,000800,000840,0005.Leased asset5548,592547,137586,842572,5316.Lease liability6548,592547,137586,842572,5311(\$100,000 x number of payments) + residual value guaranteed by lessee and/orby third party; for situation 4: (\$100,000 x 8) + (\$40,000).2Minimum lease payments plus unguaranteed residual value; for situation 4:(\$840,000 + \$60,000).3Present value of gross investment (discounted at lessor’s rate); for situation 4:(\$100,000 x 5.56376) + (\$100,000 x .40388).4(\$100,000 x number of payments) + residual value guaranteed by lessee; forsituation 4: (\$100,000 x 8) + \$40,000.5Present value of minimum lease payments (discounted at lower of lessor’s rateand lessee’s incremental borrowing rate); should not exceed fair value; forsituation 4: (\$100,000 x 5.56376) + (\$40,000 x .40388).6Present value of minimum lease payments (discounted at lower of lessor’s rateand lessee’s incremental borrowing rate); should not exceed fair value; forsituation 4: (\$100,000 x 5.56376) + (\$40,000 x .40388).
INTM ACCT CH 15 ANSWERSExercise 15-14Situation 1Amount to be recovered (fair value) \$60,000Less:
• • • 