Phil Company Leased a Machine to Its 100%-Owned Subsidiary, Scout

question 13

Multiple Choice

Phil Company leased a machine to its 100%-owned subsidiary, Scout Company. The direct financing lease required annual lease payments in advance of $2,319 for 5 years. The present value of the minimum lease payments at 8% interest is $10,000.
-Refer to Phil Company. The adjustment needed to arrive at consolidated net income for the first year after the lease is ____.

• A) $0
• B) $800
• C) $2,319
• D) $10,000