Haystack, Inc

question 90

Multiple Choice

Haystack, Inc. manufactures machinery used in the mining industry. On January 2, 2015 it leased equipment with a cost of $320,000 to Silver Point Co. The 5-year lease calls for a 10% down payment and equal annual payments of $146,518 at the end of each year. The equipment has an expected useful life of 5 years. Silver Point's incremental borrowing rate is 10%, and it depreciates similar equipment using the double-declining balance method. The selling price of the equipment is $520,000, and the rate implicit in the lease is 8%, which is known to Silver Point Co. What is the book value of the leased asset at December 31, 2015?

• A) $520,000
• B) $416,000
• C) $312,000
• D) $332,800

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Definitions:

Wye-Wound Stator

A specific method of connecting the coils of a stator in an electric motor or generator, forming a Y shape, to reduce starting currents and provide smooth operation.

Neutral Junction

A connection point in an electrical system where the neutral wires from different circuits are connected together, typically within a breaker panel or junction box.

Series

A configuration in electrical circuits where components are connected end-to-end, so the same current flows through each component.

TR Type Alternator

A specific design of alternators used in automotive applications, known for its efficiency in generating electrical power for the vehicle.