Exhibit 20-2 on January 1, 2016, Mary Company Leased Equipment, Signing a Signing

question 105

Multiple Choice

Exhibit 20-2
On January 1, 2016, Mary Company leased equipment, signing a five-year lease that requires annual lease payments of $20,000. The lease qualifies as a capital lease. The payments are made at year-end, and the first payment will be made at December 31, 2016. In addition, Mary guarantees the residual value to be $8,000 at the end of the lease term. Mary correctly uses the lessor's implicit interest rate, which is 12%. The present value factors for five periods at 12% are as follows:
-Refer to Exhibit 20-2. What would be the debit to Leased Equipment under Capital Leases on January 1, 2016? Round amounts to the nearest dollar.)

• A) $72,096
• B) $76,635
• C) $100,000
• D) $110,000

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Definitions:

Slope Regression Coefficient

A parameter in linear regression that quantifies the change in the dependent variable for each unit change in an independent variable.

Simple Linear Regression

A statistical method that models the relationship between a dependent variable and one independent variable by fitting a linear equation to observed data.

Independent Variables

Variables in an experiment or statistical model that are manipulated or categorized to determine their effect on dependent variables.

Dependent Variables

Variables in an experiment or test that respond to changes in other variables, often measured to assess an effect.