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Exhibit 21-5 the Chicago, Inc -Refer to Exhibit 21-5

question 23

Multiple Choice

Exhibit 21-5 The Chicago, Inc.entered into a five-year lease with the Urbana Company on January 1, 2010.Chicago, the lessor, will require that five equal annual payments of $25, 000 be made at the beginning of each year.The first payment will be made on January 1, 2010.The lease contains a bargain purchase option price of $12, 000, which the lessee may exercise on December 31, 2014.The lessee pays all executory costs.The cost of the leased property and its normal selling price are $95, 000 and $118, 236, respectively.Collectibility of the future lease payments is reasonably assured, and the lessor does not expect to incur any future costs related to the lease.Present value factors for a 7% interest rate are as follows:
$\begin{array}{llr} \text { Present value of $ \$ 1 $ for $ n=1 $ } &0.934579\\ \text { Present value of $ \$ 1 $ for $ n=5 $ } &0.712986\\ \text { Present value of an ordinary annuity for $ n=5 $ } &4.100197\\ \text { Present value of an annuity due for $ n=5 $ } &4.387211\\\end{array}$

-Refer to Exhibit 21-5.If Chicago requires a 7% annual return, how much gross profit will Chicago record at the inception of the lease?

Definitions:

Marketing Strategy

A company's plan for reaching prospective consumers and turning them into customers of their products or services.

Custom Cabinetry

Tailor-made cabinetry designed and built to meet specific requirements and tastes of the customer.

Product Element

A component of a product that includes features, design, quality, brand name, and packaging which together form the product's overall offer.

Marketing Mix

The set of actionable marketing tools—Product, Price, Promotion, and Place—that the firm uses to pursue its marketing objectives in the target market.