Use the Following Information for Questions 104 and 105

question 48

Multiple Choice

Use the following information for questions 104 and 105.
On January 2, 2015, Hernandez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $200,000 starting at the beginning of the first year, with title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a capital lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $1,200,000, based on implicit interest of 10%.
-In a lease that is recorded as a sales-type lease by the lessor, interest revenue

• A) should be recognized in full as revenue at the lease's inception.
• B) should be recognized over the period of the lease using the straight-line method.
• C) should be recognized over the period of the lease using the effective interest method.
• D) does not arise.

---

Definitions:

IMC Message

Integrated Marketing Communications message, which ensures all forms of communications and messages are carefully linked together to provide a unified message across all marketing channels.

Television Commercial

A form of advertising broadcast on television, designed to promote a product, service, or message to a wide audience.

AIDA Model

A common model of the series of mental stages through which consumers move as a result of marketing communications.

Intention, Action, Interest

This phrase describes the progression from having a motivating desire (intention), to undertaking a specific behavior (action), to maintaining focus on an activity or subject (interest).