Problem A

PV of Annual Rental (1M x 3.79) 3,790,000

PV of Purchase Option (500k x 0.62) 310,000
Initial lease liability 4,100,000
IDC 400,000
LI received (100,000)
Cost of ROU Jan 1, 2019 4,400,000

4,400,000/8yrs=550,000 annual depreciation

4,400,000-(550k x 3 yrs)=2,750,000 (1)
(2)
Annual depreciation 550,000
Add: Leasehold improvement depn. (200,000/5yrs) 40,000
590,000

(3)
Payment (1m x 5) +P500,000 PO 5,500,000
LL 4,100,000
interest expense 1,400,000

(4) PO-P500,000
Date Payment Interest 10% Principal PV

01/01/19       4,100,000
12/31/19 1,000,000 410,000 590,000 3,510,000

12/31/20 1,000,000 351,000 649,000 2,861,000

12/31/21 1,000,000 286,100 713,900 2,147,100

12/31/22 1,000,000 214,710 785,290 1,361,810

12/31/23 1,000,000 138,190 861,810 500,000

(5) Problem B
Date Payment Interest 10% Principal PV
01/01/19       1,895,000
12/31/19 500,000 189,500 310,500 1,584,500
12/31/20 500,000 158,450 341,550 1,242,950
12/31/21 500,000 124,295 375,705 867,245

(6) 1,895,000/5yrs=379,000 AD x 3 yrs = 1,137,000

(7)
AR for remaining 2 yrs of old LT 500,000
x PVOA of 1 at 8% for 2 periods 1.78
 PV of old rentals- Jan 1, 2022 890,000

AR for 5 yrs starting Jan 1, 2024 600,000

x PVOA of 1 at 8% for periods 3.99
PV- January 1, 2024 2,394,000
x PV of 1 at 8% for 2 periods 0.86
PV of New Rentals- Jan 1, 2022 2,058,840

Total PV-Jan. 1, 2022 (890k + 2,058,840) 2,948,840

PV-Dec 31, 2021 (867,245)
Inc. in LL on Jan 1, 2022 2,081,595

(8)
ROU-Jan 1, 2019 1,895,000
AD- Dec 31, 2021 (379K x 3 yrs) (1,137,000)
CA-Dec 31, 2021 758,000
Inc in LL-Jan 1, 2022 2,081,595
New CA-Jan 1, 2022 2,839,595

(9) 2,839,595/7 yrs=405,656

Problem C

(10)
PV of Rentals (1m x 6.145) 6,145,000
IDC 200,000
Total Cost of Property 6,345,000

(11) LL-Jan 1, 2019 6,145,000

(12) 6,345,000/10 yrs= 634,500

Problem D

(13) PV of rentals (500k x 4.04) 2,020,000

(14) 2,020,000/5 yrs 404,000

Problem E
(15)
LI 900,000
LI-depn 900,000/12 mos. X 6 (450,000)
CA-Dec 31, 2019 450,000
Rent Security Deposit 350,000
Last months' rent 150,000
950,000

Problem F
(16)
Rent Expense (15k x 12) 180,000
Addtl Rent
3m x 6% 180,000
3m x 5% 150,000
Taxes 120,000
Insurance 50,000
Total Expenses 680,000

Problem G
(17)
Rent received 1,200,000
Unearned rent income (1.2 mx 2/12) (200,000)
Earned portion 1,000,000
Maintenance (60,000)
Depreciation (5m/ 10 yrs) (500,000)
Net rent income 440,000

Problem H
(18)
Ave Rent Income
2019 (100,000 x 12) 1,200,000
2020 (150,000 x 12) 1,800,000
2021 (200,000 x 12) 2,400,000
2022 (250,000 x 12) 3,000,000
8,400,000
8,400,000/ 4 yrs=2,100,000

(19)
Cash Received 2019 & 2020 3,000,000
Rent Income 2019 & 2020 (2.1m +2.1m) 4,200,000
1,200,000

Problem I
(20)
Gross Rentals (600k x 10) 6,000,000
 NI in the lease (3,390,000 + 143,400) (3,533,400)
Total Financial Revenue 2,466,600

(21) PV factor (3,533,400/600,000) 5.889

This is applicable to 11%

Problem J

(22)
Gross Rentals (400,000 x 4) 1,600,000
NI (1,377,480)
Total financial revenue 222,520

(23)
Date Payment Interest 11% Principal PV
01/01/19       1,377,480
1/1/2019 400,000   400,000 977,480
1/1/2020 400,000 107,523 292,477 685,003
1/1/2021 400,000 75,350 324,650 360,353
1/1/2022 400,000 39,647 360,353 0

Problem K
(24)
LR (3,328,710 x 5) 16,643,550
PV of GR (3,328,710 x 3.605) 12,000,000
Total Unearned Financial Revenue 4,643,500

(25)
Sales Price (equal to PV of rentals) 12,000,000
Cost of Sales (8m +200k) 8,200,000
Manufacturer's profit 3,800,000

(26)
Interest income for first year
(12% x 12,000,000) 1,440,000

Problem L
(27)
Gross rentals (875,000 x 8) 7,000,000
Purchase option 300,000
Gross investment 7,300,000

PV of Gross Rentals (875,000 x 5.8684) 5,134,850

PV of Purchase Option (300,000 x 0.4665) 139,950
Total PV-Investment 5,274,800

GI 7,300,000
NI-PV 5,274,800
UII 2,025,200

(28)
Sales-lower FV 5,200,000
COS 3,100,000
GP 2,100,000

Problem M
(29) (800,000 x 3.17) 2,536,000
(30) (2,536,000/6,000,000 x 4,500,000) 1,902,000

(31)
FV or SP 6,000,000
CA 4,500,000
Total gain on sale 1,500,000

FV 6,000,000
Right retained by seller-lessee equal to LL (2,536,000)
Right retained by buyer-lessor 3,464,000

Gain to be recognized (3,464,000/6,000,000 x 1,500,000) 866,000

(32) 1,902,000/4 475,500

(33)
Annual rental 800,000
Depreciation (6m/10years) (600,000)
Net rental income of buyer-lessor 200,000

Problem N
*LL-(1,500,000 x 3.60) 5,400,000

SP 20,000,000
FV 18,000,000
AF 2,000,000

PV of rentals 5,400,000
PV related to financing (2,000,000)
3,400,000

* Cost of ROU (3.4m/18m x 10.8m) 2,040,000

FV 18,000,000
 CA (10,800,000)
Gain 7,200,000

FV 18,000,000
Right retained by seller-lessee equal to LL (3,400,000)
Right transferred to buyer-lessor 14,600,000

Gain to be recognized (14.6m/18m x 7.2m) 5,840,000

(34)

  PV Fraction Allocation
Rental Income 3.4m 3.4/5.4 944,444
Financial Asset 2m 2/5.4 555,556

(35)
Depreciation of building of buyer-lessor
(18m/20yrs= 900,000