Mays Company Has a Machine with a Cost of $400,000

question 65

Multiple Choice

Mays Company has a machine with a cost of $400,000 which also is its fair value on the date the machine is leased to Park Company.The lease is for 6 years and the machine is estimated to have an unguaranteed residual value of $40,000.If the lessor's interest rate implicit in the lease is 12%, the six beginning-of-the-year lease payments would be

• A)$92,361.
• B)$82,465.
• C)$78,180.
• D)$66,667.

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Definitions:

Cost Data

Information about the expenses incurred in the production of goods or services.

Market Price

The price at which a good or service is offered in the marketplace.

Short-Run Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied over a short period, when some production variables are fixed.

Marginal Cost Curve

A visual chart that illustrates the change in the expense associated with producing an extra unit of a product as the total output grows.