Heavy Mechanical Complex (HMC) Acquired a Giant Lathe Machine Under

question 32

Multiple Choice

Heavy Mechanical Complex (HMC) acquired a giant lathe machine under a capital lease agreement. HMC pays the lessor $2400 at the beginning of every 3 months for 5 years. If HMC can obtain 5-year financing at 10% compounding quarterly, what long-term lease liability will HMC initially record?

• A) $37 414
• B) $48 000
• C) $61 307
• D) $62 840
• E) $38 349

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Definitions:

Reasoning

The mental process of generating conclusions, judgments, or inferences based on premises or evidence.

Plausible

Appearing reasonable or probable; believable or credible.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses.

Syllogisms

A form of logical reasoning where a conclusion is drawn from two given or assumed propositions (premises); each premise shares a common or middle term not present in the conclusion.