ACCT 557 Week 4 Homework

ACCT 557 Week 4 Homework

Author: Minh Reed


Problem 1
Sales-Type Leases
Lease Receivable
Present value of annuity due of $1 for 10 periods disc. At 10%
Annual lease payment
Present value of estimated residual value
($30,000 x 10 years x 10%)
Lease Receivable @ inception
Annual Lease Payment
Present value of annuity due of $1 for 10 periods at 10%
Sales Price
Lease receivable at inception
Present value of residual value
Cost of Sales
Problem 2
Sales-Type Leases Lessee
The lease is a capital lease because the lease term exceeds 75% of the asset's economic life and the
present value of the minimum payments exceeds 90% of the fair value of the leased asset.
Initial Obligation under capital leases:
Minimum lease payments ($60,000) x PV of an annuity due
for 10 periods at 10% (6.75902)

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