Use the Following Information for Questions

question 103

Multiple Choice

Use the following information for questions.
Alt Corporation enters into an agreement with Yates Rentals Co.on January 1, 2011 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 $155,213 are due on December 31 of each year.
(b) The fair value of the machine on January 1, 2011, is $400,000.The machine has a remaining economic life of 10 years, with no residual 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.
-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, 2011?

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

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Definitions:

Metering Valve

A valve in brake systems that controls the flow of brake fluid, ensuring proper balance and timing in brake application.

Proportioning Valve

A valve in a vehicle's braking system that regulates the pressure between the front and rear brakes, ensuring balanced braking.

Combination Valve

A valve used in vehicle brake systems that combines several functions, such as pressure modulation, in a single unit.

Kinetic Energy

The energy possessed by an object due to its motion, which depends on its mass and velocity.