SOLVED

26) The following are some of the characteristics of an asset available for lease: Fair value of leased asset 150,000 Lease term 8 years Payment frequency Annual Payment timing Beginning of year Guaranteed residual value 25,000 Interest rate implicit in lease (not known to lessee) 11% Lessee’s incremental borrowing rate 9% Â Required: a. Determine the amount of lease payment that the lessor would require to lease the asset. b. Compute the present value of minimum lease payments for the lessee. 27) The following are some of the characteristics of an asset available for lease: Fair value of leased asset 80,000 Useful life 10 years Lease term 7 years Payment frequency Annual Payment timing Beginning of year Guaranteed residual value 10,000 Interest rate implicit in lease (not known to lessee) 10% Lessee’s incremental borrowing rate 8% Required: a. Determine the amount of lease payment that the lessor would require to lease the asset. b. Compute the present value of minimum lease payments for the lessee. c. Compute the present value of minimum lease payments for the lessor. d. Evaluate whether the lessee should classify the lease as operating or capital lease using the quantitative guidelines in ASPE.