Use the Following Information for Questions

question 61

Multiple Choice

Use the following information for questions
On January 1, 2016, Yancey, Inc.signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company.The following information pertains to this lease agreement.
(a) The agreement requires equal rental payments at the beginning of each year.
(b) The fair value of the building on January 1, 2016 is $4,000,000; however, the book value to Holt is $3,300,000.
(c) The building has an estimated economic life of 10 years, with no residual value.Yancey depreciates similar buildings on the straight-line method.
(d) At the termination of the lease, the title to the building will be transferred to the lessee.
(e) Yancey's incremental borrowing rate is 11% per year.Holt Warehouse Co.set the annual rental to insure a 10% rate of return.The implicit rate of the lessor is known by Yancey, Inc.
(f) The yearly rental payment includes $10,000 of executory costs related to taxes on the property.
-From the lessee's viewpoint, what type of lease exists in this case?

• A)Sales-type lease
• B)Sale-leaseback
• C)Finance lease
• D)Operating lease

---

Definitions:

Exchanges

Transactions or communications between individuals or entities.

Managerial Grid

Identifies five leadership styles: 1,1 impoverished; 9,1 sweatshop; 1,9 country club; 5,5 status quo; and 9,9 fully functioning.

Marketing Manager

A professional responsible for planning, executing and overseeing marketing strategies to promote a brand, product, or service.

Leadership Effectiveness

The degree to which a leader is able to achieve desired results or outcomes through the direction, influence, or guidance of others.