Hyde Company Leased Equipment to Pittman Corporation Under a Six

question 95

Multiple Choice

Hyde Company leased equipment to Pittman Corporation under a six year lease agreement that qualifies as a direct-finance lease. The asset cost $1,780,000. The lease contains a bargain purchase option that is effective at the end of the sixth year. The asset has an expected economic life of 10 years and is expected to have a residual value of $4000 at the end of the 10th year. Assuming that straight-line depreciation is used, what would be the annual depreciation? (Round your final answer to the nearest whole dollar.)

• A) $8000
• B) $355,200
• C) $178,000
• D) $177,600

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Definitions:

Perfectly Inelastic

A demand situation where the quantity demanded does not change in response to price changes.

Elastic

A characteristic of a demand or supply curve which shows a high responsiveness to changes in price.

Inelastic

Refers to a condition in which the demand or supply of a product or service remains largely unaffected by variations in its price.

Pure Monopolist

A market scenario where a single company or entity exclusively controls the entire supply of a particular product or service, without any close substitutes or competition.