Elton Electronics Leases Testing Equipment to Startup Corporation

question 148

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 $78,000. The cost of the equipment to Elton is $73,000 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 12% and they expect that collection of the $10,500 lease payments is probable. What is the principal balance in the Net Investment in Lease - Sale Type account after the first payment?

• A) $58,419
• B) $47,919
• C) $73,000
• D) $43,169

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Definitions:

Adjusted Trial Balance

A financial statement prepared after adjusting entries are made, ensuring the total debits equal total credits.

Financial Statement Column(s)

Sections or divisions in financial statements used to separate and categorize financial data into meaningful groups for analysis, such as assets, liabilities, equity, revenue, and expenses.

Net Income

The net income of a business following the subtraction of all costs and taxes from the overall income.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments have been made for errors, accruals, and deferrals, used to prepare financial statements.