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

Recognize the role of conditions precedent and subsequent in determining the obligations of parties to a contract.

Analyze the impact of external circumstances, such as legal changes and specific events, on contract discharge.

Comprehend the doctrine of anticipatory repudiation and its legal consequences.

Understand the principles of substantial performance and how they affect contractual obligations and remedies.

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Definitions:

Actions

The fact or process of doing something, typically to achieve an aim.

Developmental Theory

A framework for understanding how and why people change over the course of life, particularly from infancy through adulthood.

Social Time Clock

refers to societal expectations or norms regarding the timing of life events and milestones, such as education, marriage, and retirement.

Conflict Theory

A sociological perspective that sees social life as a competition, and focuses on the distribution of resources, power, and inequality.