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:

Kushan Dynasty

An empire in ancient Asia, established by the Kushans, that played a crucial role in cultural exchanges between the East and West, particularly in spreading Buddhism.

Vedas

Ancient sacred texts of Hinduism, consisting of hymns, philosophy, and guidance on ritual.

Aryans

An Indo-European ethnolinguistic group, traditionally associated with the spread of Indo-European languages and cultures in ancient times.

Hymns

Religious songs or poems of praise to a deity or divine being, often sung in worship services.