Elton Electronics Leases Testing Equipment to Startup Corporation

question 113

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 $98,000. The cost of the equipment to Elton is $93,000 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 8% and they expect that collection of the $12,500 lease payments is probable. How much interest will Elton record for 2019?

• A) $12,500
• B) $7,294
• C) $5,206
• D) $6,206

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Definitions:

Automatically Encode

The unconscious process of converting experiences and new information into memory without deliberate effort.

Sequence

An ordered list of events, objects, or numbers arranged in a specific or logical order.

Day's Events

The various occurrences, tasks, or activities that take place within the duration of a 24-hour period.

Automatic Processing

The subconscious aspect of cognition that involves non-conscious tasks, such as walking, which do not require active thinking or attention.