Danube Corp

question 127

Multiple Choice

Danube Corp.purchased a used machine for $21,000.The machine required installation costs of $6,000 and insurance while in transit of $700.At which of the following amounts would the machine be recorded?

• A)$21,000
• B)$27,000
• C)$21,700
• D)$27,700

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Definitions:

Capital Leases

Leasing agreements classified as purchases of assets for accounting purposes, due to their terms transferring substantial ownership rights to the lessee.

Sales-Type Leases

Leases where the lessor recognizes immediate profit on the transaction, similar to a sale, typically in equipment or vehicle leasing.

Direct-Financing Leases

Direct-Financing Leases are lease agreements where the lessor essentially acts as a financier, purchasing an asset and leasing it to the lessee, without assuming risk of ownership.

Capital Lease

A lease classified as a financial transaction where the lessee effectively buys an asset and finances it over the lease term.