On January 1, 2011, Dean Corporation Signed a Ten-Year Noncancelable

question 38

Multiple Choice

On January 1, 2011, Dean Corporation signed a ten-year noncancelable lease for certain machinery.The terms of the lease called for Dean to make annual payments of $100,000 at the end of each year for ten years with title to pass to Dean at the end of this period.The machinery has an estimated useful life of 15 years and no residual value.Dean uses the straight-line method of depreciation for all of its fixed assets.Dean accordingly accounted for this lease transaction as a finance lease.The lease payments were determined to have a present value of $671,008 at an effective interest rate of 8%.With respect to this capitalized lease, Dean should record for 2011

• A)lease expense of $100,000.
• B)interest expense of $44,734 and depreciation expense of $38,068.
• C)interest expense of $53,681 and depreciation expense of $44,734.
• D)interest expense of $45,681 and depreciation expense of $67,101.

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Definitions:

Resonance Form

Structures that depict individual contributors to the overall delocalization of electrons within a molecule.

Free Radical

Highly reactive atoms or molecules with unpaired electrons, capable of engaging in chemical reactions that can lead to polymerization or degradation.

Monochlorination

The chemical process of adding one chlorine atom to a molecule, often used in organic synthesis to create chlorinated compounds.

Butane

A gaseous hydrocarbon with the formula C4H10, commonly used as fuel in lighters and portable stoves.