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Northern Equipment Leases Cooling Towers to Warmup Corporation

question 11

Multiple Choice

Northern Equipment leases cooling towers to Warmup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $180,000. The cost of the equipment to Northern is $170,000 and the expected life of the testing equipment is 8 years. At the end of the useful life, it is expected that the equipment will have a residual value of $20,000, although the lessee guarantees only $15,000. Northern incurs initial direct costs of $20,000, 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. Northern's implicit rate is 8% and they expect that collection of the $30,000 payments is probable. The lease is properly classified as a sales-type lease. What is Northern's implicit rate for the lease? (Round any intermediate calculations to the nearest dollar, and round your final percentage two decimal places, X.XX%.)

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Goodwill

The intangible asset that arises as a result of the acquisition of one company by another for a premium value.

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The phenomenon where an individual finds themselves unable to proceed with a presentation, similar to writer's block.

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