M & O Company Is Preparing an Excel Spreadsheet for a 5-Year

question 21

Multiple Choice

M & O Company is preparing an Excel spreadsheet for a 5-year finance lease. The implicit interest rate in the lease is 6%. The beginning of the lease is January 1. Lease payments are made each December 31. A portion of the spreadsheet appears as follows:
- What formula should M & O use in cell E8 to calculate the carrying value of the lease payable after the second lease payment?

• A) =E7-D8
• B) =E7+D8
• C) =E8+D8
• D) =PV(C2,C3,0,C1,type)

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Definitions:

Interest Basis

A method used to calculate interest payments, based on how the interest accrues over time.

Par Value

The face value of a bond or stock, representing the amount returned to the holder at maturity.

Common Stock

Equity ownership in a corporation, granting voting rights and a share in profits through dividends.

Semi-Annual

Semi-Annual refers to something occurring or done twice a year, typically every six months.