Bottomly Industries Has Entered a Capital Lease with a Financial

question 33

Multiple Choice

Bottomly Industries has entered a capital lease with a financial institution for a warehouse on a small parcel of land. If the interest rate being charged is 12%, compounded every 2 months, and Bottomly will be making payments of $24,083 at the beginning of every two months [six times a year] for five years, what is the historical cost value of the asset that will appear on the Company's balance sheet?

• A) $86,814
• B) $193,993
• C) $325,667
• D) $539,375
• E) $550,162

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Definitions:

Materials Cost

The expense incurred to obtain materials required for the production of goods or services.

FIFO Process Cost Method

A method of inventory costing that assumes the first units produced or purchased are the first ones used or sold, standing for "First-In, First-Out."

Finished Goods

Products that have completed the manufacturing process and are ready to be sold to customers.

Work In Process

Partially finished goods that are in various stages of production in a manufacturing company's inventory.