On January 1, 2001, Wishful Thinking, a Lessor, Entered into a Direct-Financing

question 1

Multiple Choice

On January 1, 2001, Wishful Thinking, a lessor, entered into a direct-financing lease agreement with Lennard Company. The lease agreement required 6 equal annual payments of $50,000 at the end of each year. The leased property had an estimated residual value of $14,000, which was guaranteed by an unrelated third party. Wishful Thinking desired a 10% rate of return. What was the amount that Wishful Thinking recorded as interest revenue on the lease at the end of the year 2002?

• A) $24,744.20
• B) $19,823.22
• C) $25,225.80
• D) $26,750

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Definitions:

Theory Of Mind

The ability to attribute mental states—beliefs, intents, desires, emotions, knowledge—to oneself and others, and to understand that others have beliefs and perspectives that are different from one’s own.

Cognitive Development

The progression of learning and mental processing abilities, including thinking, reasoning, and problem-solving, over time.

Desires

Strong feelings of wanting or wishing for something to happen or be the case.

Beliefs

Convictions or acceptances that something exists or is true, especially without proof.