Kelly's Restaurants Has a Balance Sheet with $306 503 in Total

question 113

Multiple Choice

Kelly's Restaurants has a balance sheet with $306 503 in total assets, $206 127 in debt and $154 376 in equity. The company is about to lease new equipment for a 5-year term at a rate of 6.25% and annual payments of $22 308. The equipment's useful life is 6 years. On the company's balance sheet, what will the amount of total assets be on the day the lease contract is signed?

• A) $76 859
• B) $306 503
• C) $405 670
• D) $99 167

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Definitions:

Semiannual Compounding

Refers to the process of applying interest to a principal amount twice a year, resulting in interest being calculated on previously earned interest as well as the principal.

Calgary Real Estate Board

An industry association in Calgary, Alberta, that provides resources and support to real estate professionals.

Compound Increase

An increase where interest is calculated on the initial principal and also on the accumulated interest of previous periods.

Compounded Semiannually

The process of computing interest twice yearly and adding it to the principal sum, affecting the total amount earned or paid.