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

question 31

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 of assets and liabilities needed to prepare a consolidated balance sheet is to eliminate the:

• A) asset leased.
• B) asset leased and the obligation under the capital lease.
• C) obligation under the capital lease and the present value of the minimum lease payments.
• D) obligation under the capital lease.

---

Definitions:

Primary Activity

Primary activity is a principal operation or function directly involved in creating and delivering a product or service, such as production, marketing, and sales.

Strategic Priority Analysis

The process of identifying and evaluating the importance and urgency of different strategic initiatives or actions to achieve business objectives.

Integrated Analysis

Integrated analysis is a comprehensive examination that combines various data sources and methodologies to gain a complete understanding of a complex problem or situation.

Dissonance Analysis

The examination of inconsistencies between beliefs and behaviors, often applied in marketing to understand consumer decision-making processes.