Assume the Initial Present Value of the Payments on a Lease

question 19

Multiple Choice

Assume the initial present value of the payments on a lease are equal to the cost of the leased asset. This capital lease is recorded as an asset on the balance sheet of the lessee in an amount equal to the:

• A) dollar amount of each lease payment multiplied by the total number of lease payments in the original agreement.
• B) dollar amount of each lease payment multiplied by the number of lease payments remaining.
• C) dollar amount of each lease payment multiplied by the number of lease payments per year.
• D) present value of the remaining lease payments.
• E) lesser of the present value of the remaining lease payments or the present value of the lease payments for a one-year period.

---

Definitions:

Net Pay

The take-home pay an employee receives after deductions such as taxes and retirement contributions.

Federal Income Tax

The annual income of individuals, corporations, trusts, and other legal entities is subject to a tax imposed by the IRS.

FICA Tax Rate

The combined percentage rate for Social Security and Medicare taxes that both employees and employers must pay based on earned income.

Hourly Wage

Compensation based on the number of hours worked, typically paid to employees on an hourly rather than salary basis.