Use the Following Information for Questions

question 55

Multiple Choice

Use the following information for questions.
Ball Ltd. purchased land and constructed a service station, at a total cost of $ 450,000. On January 2, 2019, when construction was completed, Ball sold the service station and land to a major oil company for $ 500,000, and immediately leased it back from the oil company. Fair value of the land at the time of the sale was $ 50,000. The lease is a 10-year, non-cancellable lease. Ball uses straight-line amortization for its other assets. The economic life of the station is 15 years with zero residual value. Title to the property will revert back to Ball at the end of the lease. A partial amortization schedule for this lease follows:
-What is the interest rate implicit in the amortization schedule presented above?

• A) 12%
• B) 10%
• C) 8%
• D) 6%

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Definitions:

Depression of the 1930s

A severe worldwide economic downturn that lasted throughout the 1930s, marked by significant declines in industrial production, widespread unemployment, and deflation.

Recession

A temporary stage of economic depletion, highlighted by a downturn in trade and industrial action, normally identified by a GDP reduction in two back-to-back quarters.

Stagflation

A situation in the economy where inflation and unemployment rates are high simultaneously, leading to slow economic growth.

Deflation

A decrease in the general price level of goods and services, often indicative of a reduction in the money supply or demand.