WXZ Entered into a Direct Financing Lease with TUV for the Use

question 186

Multiple Choice

WXZ entered into a direct financing lease with TUV for the use of an asset which cost WXZ $240,000.The lease agreement contained a bargain purchase option effective immediately after the fifth rental, which provided that TUV could purchase the asset at that time.The estimated life of the asset was 10 years with an estimated residual value of $400.TUV's annual depreciation expense is (use straight- line) :

• A)$23,960
• B)$48,000
• C)$22,200
• D)$44,400

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Definitions:

Annual Revenues

The total amount of income generated by a business or organization from its activities over the course of a year.

Wal-Mart

A multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores.

High-income Economies

Countries with a high gross national income per capita, according to classification by international financial institutions like the World Bank.

Lower-middle-income Economies

Countries classified by the World Bank based on gross national income (GNI) per capita that are above low-income but below upper-middle-income thresholds.