Refer to the Following Lease Amortization Schedule

question 7

Multiple Choice

Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,000 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.

-What is the total interest paid over the term of the lease?

• A) $42,000.
• B) $8,200.
• C) $7,400.
• D) $3,460.

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Definitions:

Investment Opportunity

A potential venture or project that promises returns or profits to the investor.

Combined Margin

The total margin that results from combining the gross margin and net margin of a company.

Contribution Margin Ratio

A financial metric that shows the percentage of sales revenue that is not consumed by variable costs and contributes to covering fixed costs.

Fixed Expenses

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.