Leewin Brokerage Enters into a Lease Agreement with Bumble Motors

question 63

Multiple Choice

Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $77,000 under a 5-year lease on December 20, 2018. The lease commences on January 1, 2019, and Leewin will return the automobile to Bumble on December 31, 2023. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,900 on December 20, 2018. In addition, the lease agreement stipulates annual payments of $10,900, due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit rate of the lease is 6% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $1,100. Assuming that this is classified as an operating lease, what is the annual lease expense reported on the income statement?

• A) $10,900
• B) $13,300
• C) $12,000
• D) $11,120

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Definitions:

Voltage-Sensitive

Voltage-sensitive refers to the property of a molecule, ion channel, or membrane to respond to changes in electrical potential or voltage across it.

Sodium Channels

Ion channels found in the membranes of cells, allowing for the passage of sodium ions, important in the generation and conduction of action potentials in neurons and muscle cells.

Cell Membrane

A partial-permeable barrier encasing the cell's cytoplasm, regulating the movement of materials into and from the cell.

Axons

are long, slender projections of nerve cells (neurons) that transmit electrical impulses away from the neuron’s cell body.