On January 1, 2020, Marlene Corp

question 49

Multiple Choice

On January 1, 2020, Marlene Corp. enters into an agreement with Dietrich Rentals Inc. to lease a machine from them. Both corporations adhere to ASPE. The following data relate to the agreement:
1) The term of the non-cancellable lease is three years with no renewal option. Payments of $ 271,622 are due on December 31 of each year.
2) The fair value of the machine on January 1, 2020, is $ 700,000. 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.
3) Marlene depreciates all its machinery on a straight-line basis.
4) Marlene's incremental borrowing rate is 10%. Marlene does not have knowledge of the 8% implicit rate used by Dietrich.
5) Immediately after signing the lease, Dietrich discovers that Marlene is the defendant in a lawsuit that is sufficiently material to make collectibility of future lease payments doubtful.
If Marlene accounts for the lease as an operating lease, what expense(s) will be reported in calendar 2020 in relation to this lease?

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

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Definitions:

Political Organization

The way power, as the capacity to do something, is accumulated, arranged, executed, and structurally embedded in society; the means through which a society creates and maintains social order and reduces social disorder.

Uncentralized Political System

A form of governance where power or legal authority is dispersed among various levels of government or organizations rather than being centralized in a single authority.

Large Population

A significant number of individuals belonging to a particular species living within a specified area, which can impact its ecosystem and resources.

Formal Political Power

The officially sanctioned ability to influence or control the actions of others, typically vested in government or organizational leaders.