Use the Following Information for Questions 75 Through 80

question 78

Multiple Choice

Use the following information for questions 75 through 80. (Annuity tables on page 21-25.)
Alt Corporation enters into an agreement with Yates Rentals Co. on January 1, 2015 for the purpose of leasing a machine to be used in its manufacturing operations. The following data pertain to the agreement:
(a) The term of the noncancelable lease is 3 years with no renewal option. Payments of $287,432 are due on January 1 of each year.
(b) The fair value of the machine on January 1, 2015, is $800,000. The machine has a remaining economic life of 10 years, with no salvage value. The machine reverts to the lessor upon the termination of the lease.
(c) Alt depreciates all machinery it owns on a straight-line basis.
(d) Alt's incremental borrowing rate is 10% per year. Alt does not have knowledge of the 8% implicit rate used by Yates.
(e) Immediately after signing the lease, Yates finds out that Alt Corp. is the defendant in a suit which is sufficiently material to make collectibility of future lease payments doubtful.
-What type of lease is this from Alt Corporation's viewpoint?

• A) Operating lease
• B) Capital lease
• C) Sales-type lease
• D) Direct-financing lease

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Definitions:

Sexual Orientation

Sexual orientation refers to an enduring pattern of emotional, romantic, or sexual attractions to men, women, or both sexes. It also encompasses a person's sense of personal and social identity based on those attractions.

Environmental Conditions

The various physical and biological factors that influence the life and development of organisms within an environment.

Prenatal Development

The process of growth and development within the womb from conception to birth, encompassing the formation and maturation of the fetus.

Homosexual Behavior

Engaging in romantic or sexual activities with a person of the same sex.