Exercise 15-9
1. Receivable at December 31, 2016
$562,907 x 5.32948 = $3,000,000
(rounded)
2. Interest revenue for year ended December 31, 2016
June 30, 2016 interest revenue ………………………….. $ 0*
Calculations:
June 30, 2016
Lease receivable (present value calculated above) ………… 3,000,000
15–42 Intermediate Accounting, 8/e
Exercise 15-10
1. Calculation of the present value of lease payments (“selling price”)
$562,907 x 5.32948 = $3,000,000
2. Receivable at December 31, 2016
Receivable
Initial balance, June 30, 2016 ………… $3,000,000
3. Income effect for year ended December 31, 2016
June 30, 2016 interest revenue …………………………... $ 0*
Calculations:
June 30, 2016*
Lease receivable (present value calculated above) …………. 3,000,000
Exercise 15-11
Requirement 1
a. Transfer of ownership is one of four criteria any of which is sufficient to qualify
this as a capital lease.
b. A bargain purchase option is one of four criteria any of which is sufficient to
qualify this as a capital lease because, by definition, ownership is expected to
transfer.
Exercise 15-11 (concluded)
Requirement 2
a. Transfer of ownership normally is an indicator of a finance lease.
b. A bargain purchase option normally is an indicator of a finance lease because,
by definition, ownership is expected to transfer.
c. If the term of the lease constitutes a “major portion” of the useful life of an asset
Exercise 15-12
Situation 1
(a) $600,000 ÷ 6.53705** = $91,785
fair lease
value payments
Situation 2
(a) $980,000 ÷ 9.95011** = $98,491
fair lease
value payments
** present value of an annuity due of $1: n=20, i=9%
Situation 3
(a) $185,000 ÷ 3.40183** = $54,382
fair lease
value payments
15–46 Intermediate Accounting, 8/e
Exercise 15-13
Situation 1
(a) $600,000 ÷ 5.88923** = $101,881
fair lease
value payments
Situation 2
(a) $980,000 ÷ 9.12855** = $107,355
Situation 3
(a) $185,000 ÷ 3.03735** = $60,908
fair lease
Exercise 15-14
Situation 1
Amount to be recovered (fair value) $50,000
Exercise 15-14 (concluded)
Situation 3
Amount to be recovered (fair value) $75,000
Situation 4
Exercise 15-15
Situation
1 2 3 4
A. The lessor’s:
1. Minimum lease payments1 $700,000 $750,000 $800,000 $840,000
Exercise 15-16
Situation 1
Amount to be recovered (fair value) $60,000
Less: Present value of the BPO price ($10,000 x .56743*) (5,674)
Amount to be recovered through periodic lease payments $54,326
Exercise 15-16 (concluded)
Situation 3
Amount to be recovered (fair value) $185,000
15–52 Intermediate Accounting, 8/e
Exercise 15-17
Requirement 1
Note:
Because exercise of the option appears at the inception of the lease to be
reasonably assured, payment of the option price ($45,000) is expected to occur
when the option becomes exercisable (at the end of the third year).
Requirement 2
Lease Amortization Schedule
Effective Decrease Outstanding
Payments Interest in Balance Balance
12% x Outstanding Balance
128,872
1/1/16 36,000 36,000 92,872
Exercise 15-17 (concluded)
Requirement 3
January 1, 2016
Leased equipment (calculated above) ………………….. 128,872
Lease payable (calculated above) ……………………. 128,872
Exercise 15-18
Requirement 1
Amount to be recovered (fair value) $30,900
Requirement 2
Lease Amortization Schedule
Effective Decrease Outstanding
Payments Interest in Balance Balance
10% x Outstanding Balance
30,900
Exercise 15-18 (concluded)
Requirement 3
January 1, 2016
Lease receivable (PV of lease payments + PV of BPO) ……… 30,900
15–56 Intermediate Accounting, 8/e
Exercise 15-19
Requirement 1
January 1, 2016
Brand Services (Lessee)
Leased equipment (present value of lease payments) ………… 316,412
Requirement 2
December 31, 2016
Brand Services (Lessee)
Interest expense (12% x [$316,412 – 50,000]) ……………………. 31,969
Exercise 15-20
December 31, 2016
Brand Services (Lessee)
Interest expense (12% x [$316,412 – 50,000]) ……………………. 31,969
NRC Credit (Lessor)
Cash (lease payment)…………………………………………………. 55,950
Exercise 15-21
Requirement 1
January 1
Cash ……………………………………………………………………… 20,873
Requirement 2
January 1
Proof that new effective rate is 9% (not required):
$102,062 ÷ 4.88965** = $20,873
Exercise 15-21 (concluded)
January 1
Lease receivable (fair value / present value) …………………… 100,000
Requirement 3
January 1
Lease receivable (fair value / present value) …………………… 100,000
15–60 Intermediate Accounting, 8/e
Exercise 15-22
January 1, 2016, 2017, 2018
Cash ……………………………………………………………………… 137,000