When Deciding to Lease a New Cutting Machine or Continue

question 24

Multiple Choice

When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

• A) $50,000, cost of the old machine
• B) $20,000, cost of the new machine
• C) $10,000, selling price of the old machine
• D) $3,000, annual savings in operating costs if the new machine is purchased

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Definitions:

Note Receivable

A written promise that one party will pay another party a definite sum of money on demand or at a specified future date.

Long-Term Notes Receivable

Loans or credits extended to borrowers with repayment terms extending beyond one year, recorded as assets on the balance sheet.

Bill And Hold Sale

A sales arrangement where the seller bills the customer for purchased goods but holds onto the goods until the customer requests delivery.

Collectibility

The likelihood that a receivable amount will be paid by the debtor, impacting the recognition of revenue.