On January 1, 2010, Wally Company Signed a Four-Year Lease

question 108

Multiple Choice

On January 1, 2010, Wally Company signed a four-year lease requiring annual payments of $45, 000, with the first payment due on January 1, 2010.Wally's incremental borrowing rate was 6%.Actuarial information for 6% follows: $\begin{array}{llr}&\text {3 Periods}&\text {4 Periods}&\text {5 Periods}\\ \text { Present value of an annuity due of \( 1 @ 6 \% \) } &2.83339&3.67301&4.46511\\ \text { Present value of ordinary annuity of 1 @ \( 6 \% \) } &2.67301&3.46511&4.21236\\\end{array}$
Assuming the lease qualifies as a capital lease, what amount should be recorded as leased equipment under capital leases on January 1, 2010 (rounded to the nearest dollar) ?

• A)$200, 931
• B)$165, 285
• C)$155, 931
• D)$144, 555

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Definitions:

Duress

Coercing someone into acting against their will by using force, threats, or pressure.

Undue Influence

The abuse of a power position or influence to manipulate someone into making a decision that is not in their best interest.

Testamentary Capacity

The legal mental competence required of an individual to execute a valid will, including understanding the nature of the act and the effects of their decisions.

Executor

An individual appointed in a will to manage the estate of the deceased, ensuring that all debts are paid and assets are distributed according to the will.