Use the Following Information for Questions

question 26

Multiple Choice

Use the following information for questions
Alt Corporation enters into an agreement with Yates Rentals Co.on January 1, 2016 for the purpose of leasing a machine to be used in its manufacturing operations.The following data pertain to the agreement:
(a) The term of the noncancelable lease is 3 years with no renewal option.Payments of $287,432 are due on January 1 of each year, starting January 1, 2016.
(b) The fair value of the machine on January 1, 2016, is $800,000.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.
(c) Alt depreciates all machinery it owns on a straight-line basis.
(d) Alt's incremental borrowing rate is 10% per year.Alt does not have knowledge of the 8% implicit rate used by Yates.
-Which of the following lease-related revenue and expense items would be recorded by Yates if the lease is accounted for as an operating lease?

• A)Rental Revenue
• B)Interest Income
• C)Depreciation Expense
• D)Rental Revenue and Depreciation Expense

---

Definitions:

Chemoautotroph

An organism that derives its energy from chemicals and synthesizes its own organic compounds from carbon dioxide.

Mutualism

In ecology, a symbiotic relationship in which both partners benefit from the association. Compare with parasitism and commensalism.

Photoautotroph

An organism that obtains energy from light and synthesizes organic compounds from inorganic raw materials; includes plants, algae, and some bacteria. Compare with photoheterotroph, chemoautotroph, and chemoheterotroph.

Fumigallin

A chemical compound originally discovered for its antibiotic properties, often mentioned in the context of beekeeping to treat nosema disease.