The Inception of a Lease Is 1/1/x1

question 82

Multiple Choice

The inception of a lease is 1/1/x1.A third party guarantees the residual value of the asset under lease, estimated to be $12,000 at 1/1/x6, the end of the lease term.Annual lease payments are $10,000 due each December 31 beginning 12/31/x1.The last payment is due 12/31/x5.Both the lessor and lessee use 10% as the interest rate.The remaining useful life of the asset was 6 years at inception.What is the net asset balance for the lesso and net liability balance for the lessee, at inception (rounded to the nearest dollar) ?

• A)Choice 1
• B)Choice 2
• C)Choice 3
• D)Choice 4
• E)Choice 5

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Definitions:

BIOS

Basic Input/Output System, a software stored on a small memory chip on the motherboard, responsible for booting the computer and managing data flow between the computer's operating system and attached devices.

Head Crashes

A failure in hard disk drives when the read-write head comes into contact with the spinning disk surface, leading to data loss or damage.

SSDs

Solid State Drives, a type of data storage device that uses integrated circuit assemblies to store data persistently, typically using flash memory.

SSD

Solid State Drive, a type of storage device that uses integrated circuit assemblies to store data persistently, typically using flash memory, and functioning as secondary storage in the hierarchy of computer storage.