StatMed Corporation Leases Medical Equipment Under a Five-Year Capital Lease

question 128

Multiple Choice

StatMed Corporation leases medical equipment under a five-year capital lease. The terms of the lease call for five equal payments of $21,000, with the first payment due at the inception. The interest rate implicit in the lease is 10%. At what value is the leased equipment recorded at the inception of the lease?

• A) $21,000
• B) $105,000
• C) $87,567
• D) $79,607

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Definitions:

Marginal Product

The extra production achievable by incorporating an additional unit of a particular input, assuming all other variables remain constant.

Average Product

The output per unit of input, calculated by dividing total output by total input.

Diminishing Marginal Returns

Diminishing Marginal Returns is an economic principle stating that as additional units of a factor of production are added to a fixed amount of other factors, the incremental increase in output will eventually decrease.

Marginal Product

The additional output that results from using one more unit of a specific input, keeping other inputs constant.