Elton Electronics Leases Testing Equipment to Startup Corporation

question 9

Multiple Choice

Elton Electronics leases testing equipment to Startup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $118,000. The cost of the equipment to Elton is $113,000 and the expected life of the testing equipment is 8 years. Elton incurs initial direct costs of $10,000, which they elect to expense. The lease term for the equipment is 8 years, with the first payment due upon delivery, and seven subsequent annual payments beginning on December 31, 2019 and ending on December 31, 2025. Elton's implicit rate is 5% and they expect that collection of the $14,500 lease payments is probable. What is the principal balance in the Net Investment in Lease - Sale Type account after the second payment on December 31, 2019?

• A) $98,402
• B) $83,902
• C) $113,000
• D) $73,597

---

Definitions:

Surgeons

Medical professionals specialized in performing surgical operations to treat diseases, injuries, or deformations.

Cabinet Makers

Skilled craftsmen who create fine wood furniture and detailed cabinetry work.

Sense of Agency

The feeling or belief that one is in control of their actions and can effect change in the world or their own lives.

Clock Time

A form of time developed through industrialization in which time is no longer passed but spent. Time is a valuable currency that defines the employer–employee relationship and over which struggles occur.