Use the Information Below to Answer the Following Questions

question 166

Multiple Choice

Use the information below to answer the following questions.

On December 31, 2017, Reagan Inc. signed a lease with Silver Leasing Co. for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2023. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease.

Reagan's lease amortization schedule appears below:


-In this situation, Reagan:

• A) is the lessee in a sales-type lease.
• B) is the lessee in a finance lease.
• C) is the lessor in a finance lease.
• D) is the lessor in a sales-type lease.

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Definitions:

Regular Time Cost

The cost associated with normal operating hours or work performed during standard working times, excluding overtime or premium pay rates.

Varying Inventory Levels

Adjusting the amount of stock on hand to meet changing demand conditions or to maximize operational efficiency.

Back Ordering

Refers to the process of accepting and processing orders for currently out-of-stock goods to be fulfilled when the stock is replenished.

Services

Activities or benefits provided to consumers or businesses that do not result in the ownership of tangible goods.