Recording Entries for Sales-Type Lease: Lease Payment Calculation A lessor entered into a 5-year lease appropriately classified as a sales-type lease. The cost of the underlying asset was $120,000 and the fair value of the asset was $150,000. The lease included a purchase option that allowed the lessee to purchase the underlying asset for $15,000 at the end of the lease. Because of the discount offered in the purchase option from the expected residual value of $21,000, the lessor is reasonably certain that the lessee will exercise the purchase option. The first lease payment will be made immediately, with annual payments due throughout the lease term. Note: Round each answer to the nearest whole dollar. a. Assuming that the lessor had a desired rate of return of 6%, compute the annual lease payment. b. Assume the same facts (original scenario) except that the exercise of the option is not reasonably certain. Compute the annual lease payment. C. Assume the same facts (original scenario) except that lessor's desired rate of retum is 8 Compute the annual lease payment
Recording Entries for Sales-Type Lease: Lease Payment Calculation A lessor entered into a 5-year lease appropriately classified as a sales-type lease. The cost of the underlying asset was $120,000 and the fair value of the asset was $150,000. The lease included a purchase option that allowed the lessee to purchase the underlying asset for $15,000 at the end of the lease. Because of the discount offered in the purchase option from the expected residual value of $21,000, the lessor is reasonably certain that the lessee will exercise the purchase option. The first lease payment will be made immediately, with annual payments due throughout the lease term. Note: Round each answer to the nearest whole dollar. a. Assuming that the lessor had a desired rate of return of 6%, compute the annual lease payment. b. Assume the same facts (original scenario) except that the exercise of the option is not reasonably certain. Compute the annual lease payment. C. Assume the same facts (original scenario) except that lessor's desired rate of retum is 8 Compute the annual lease payment
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 3E: Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning