Tutorial Solution Lease Lessess
Tutorial Solution Lease Lessess
Tutorial Solution Lease Lessess
Annual
Lease Reduction
Payment Interest (8%) of Lease Lease
Date Plus GRV on Liability Liability Liability
1/1/19 £571,641
1/1/19 £113,864 £ –0– £113,864 457,777
1/1/20 113,864 36,622 77,242 380,535
1/1/21 113,864 30,443 83,421 297,114
1/1/22 113,864 23,769 90,095 207,019
1/1/23 113,864 16,562 97,302 109,717
1/1/24 113,864 8,777 105,087 4,630
12/31/24 5,000 370 4,630 0
£688,184 £116,543 £571,641
PROBLEM 21.1 (Continued)
January 1, 2020
Lease Liability.......................................................... 36,622
Interest Expense...............................................
36,622
(c) A lease incentive does not impact the measurement of the lease
liability. However, a reduction in the right-of-use asset must be made.
Thus, the right-of-use asset would be measured at £566,641 (£571,641
– £5,000).
LO: 2, 4, Bloom: AP, Difficulty: Moderate, Time: 25-35, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
PROBLEM 21.2
(a) The $550,000 is the present value of the five annual lease
payments of $120,987 to be made at the beginning of each year
discounted at 5% since the lessee knows the implicit rate.
*Rounded.
Assets Liabilities
Non-current assets: Current:
Right-of-use Asset $330,000 Lease liability $120,987*
Noncurrent:
Lease liability $329,477**
*The current portion of the lease liability will contain a component for the accrued
interest expense to be paid on the lease liability ($429,013 X 5% = $21,451) plus a
component for the reduction of the original lease liability ($120,987 – $21,451 =
$99,536).
**See amortization schedule from part (d).
LO: 2, Bloom: AP, Difficulty: Moderate, Time: 20-30, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
PROBLEM 21.4
The leased computer and the related liability are recorded at the
present value of the lease payments as follows: $40,000 X 102.987 =
$4,119,480.
PROBLEM 21.8
(a)
For purposes of measuring the initial lease liability, only probable
amounts expected to be owed under the residual value guarantee
should be included. That is, only the present value of the
difference between
the residual value guarantee and the expected residual value at
the end of the lease term should be included. The calculation of
the initial value of the lease liability is as follows:
PV of Lease Liability:
PV of rental payments, R$60,000 X 8.10782.....................
R$486,469
PV of guaranteed residual expected to be owed
[(R$15,000 – R$10,000) X .61391]..................................
3,070
Initial lease liability.............................................................
R$489,539
PROBLEM 21.8 (Continued)