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

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Definitions:

England

A country that is part of the United Kingdom, known for its rich history, cultural impact, and contributions to the global political and economic systems.

Minimum Wage Laws

Laws set by legislation that determine the lowest hourly rate that workers can be paid.

Lower Skills

Lower Skills refer to a relatively low level of expertise or competency in performing tasks, usually requiring less education or training.

Compensating Differentials

Wage differentials that arise to compensate workers for the desirability or undesirable aspects of their jobs, such as risk or location.