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.

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Definitions:

Secondary Deviance

The process of a person’s self-concept changing after being publicly labeled as deviant, leading to further deviant behavior.

Deviant Identity

The self-conception and social identity of an individual who is seen as deviating from the norms or values of society, often resulting in stigma or social exclusion.

Incapacitation

An approach to punishment that seeks to protect society from criminals by imprisoning or executing them.

Criminal Justice

The system of laws, law enforcement, courts, and corrections designed to deter and punish crime and protect society.