Exhibit 21-3 on January 1, 2010, Quincy Company Enters into a Five-Year

question 54

Multiple Choice

Exhibit 21-3 On January 1, 2010, Quincy Company enters into a five-year sales-type lease with Andy Company.The lease requires Andy to make five annual payments at the beginning of the year, with the first payment due January 1, 2010.The lease includes a bargain purchase price of $10, 000.Quincy requires a 10% rate of return.The cost to Quincy of the property is $100, 000, and it has a fair value of $150, 000.Present value factors for a 10% interest rate are as follows:
$\begin{array}{llr} \text { Present value of \( \$ 1 \) for \( n=1 \) } &0.909091\\ \text { Present value of \( \$ 1 \) for \( n=5 \) } &0.620921\\ \text { Present value of an ordinary annuity for \( n=5 \) } &3.790787\\ \text { Present value of an annuity due for \( n=5 \) } &4.169865\\\end{array}$

-Refer to Exhibit 21-3.The annual lease payment Quincy would require is (round the answer to the nearest dollar)

• A)$35, 972
• B)$39, 570
• C)$34, 483
• D)$37, 931

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Definitions:

Worker Recreational Facilities

Facilities provided by employers for employees' relaxation and leisure, aiming to improve morale and productivity.

Facility-Level

Pertaining to costs and activities that are necessary for maintaining the overall operation of a plant or company, but not directly tied to individual products.

Underapplied Overhead

Represents the situation when the allocated factory overhead costs are less than the actual factory overhead costs incurred.

Predetermined Overhead Rates

A rate calculated before a period begins, used to estimate the manufacturing overhead costs that will be allocated to each unit of product.