Use the Following Information for Questions 75 Through 80

question 68

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.
-If Alt accounts for the lease as an operating lease, what expenses will be recorded as a consequence of the lease during the fiscal year ended December 31, 2015?

• A) Depreciation Expense
• B) Rent Expense
• C) Interest Expense
• D) Depreciation Expense and Interest Expense

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Definitions:

Myosin Myofilaments

Protein filaments that function with actin filaments to produce muscle contraction.

Complete Tetanus

A state of sustained muscle contraction without relaxation, usually caused by rapid repeated stimuli.

Stimuli Frequency

The rate at which stimuli are presented over time, often measured in hertz (Hz) in the context of sensory and perceptual experiments.

Involuntary Paralysis

The inability to move muscles or control movement, often without conscious will, due to neurological or muscular disorders.