On January 1st, 2014, ABC Inc

question 52

Multiple Choice

On January 1st, 2014, ABC Inc.(the lessor) agrees to lease a piece of specialized piece of machinery to DEF Inc.(the lessee) for 5 years.ABC Inc.is a financial intermediary specializing in leasing arrangements such as the one described below.Details are as follows: Fair value of machinery at inception of the lease: $100,000.Lease term: 5 years (no bargain renewal terms) .
Executory costs of $10,000 are reimbursed by the lessee.
5 Annual lease payments of $23,000 each are made on January 1st of each year starting on January 1st, 2014.
Bargain purchase option at end of lease: $5,000.It is estimated that the equipment will have a fair value of $10,000 at the end of the lease.
Economic life of the asset is 10 years, after which the equipment will be worthless.Straight-line depreciation applies.
ABC's implicit interest rate with respect to this lease is 10%.This is rate is known by DE Inc.
DEF Inc's incremental borrowing rate is 9%.
-What would be the amount of finance revenue recorded by ABC Inc.in the first year of the lease (rounded) ?

• A)$7,601
• B)$9,901
• C)$10,000
• D)$7,700

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Definitions:

Sexual Universe

An encompassing term that refers to the entirety of sexual experiences, identities, orientations, and expressions.

Marriage Regulation

The laws and policies governing who can marry, under what conditions, and what legal rights and responsibilities arise from marriage.

Imposed

Something that is forced upon people or circumstances without their consent or agreement.

Heterosexism

Discrimination or prejudice against individuals based on a presumption of heterosexuality being the norm or superior to other sexual orientations.