For the Following Lease,determine the Minimum Lease Payments for the Lessee

question 25

Multiple Choice

For the following lease,determine the minimum lease payments for the lessee. $$\begin{array} { | l | l | } \hline \text { Annual lease payment at the end of the end } & \$ 30,000 \\\hline \text { Lease term } & 5 \\\hline \text { Incremental rate } & 10 \% \\\hline \text { Implicit rate (unknown to lessee) } & 3 \% \\\hline \text { Guaranteed residual value } & 28,000 \\\hline\end{array}$$

• A)113,723
• B)119,781
• C)131,109
• D)138,838

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Definitions:

Operating Activities Section

A component of the cash flow statement showing cash inflows and outflows related to the primary business activities.

Direct Method

A way of preparing a cash flow statement where actual cash flows from operating activities are listed directly.

Capital Asset

An asset of significant value owned by a business or individual for a long period, usually used in the production of goods or services.

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and other investments that are not considered to be cash equivalents.