If the Lease Payments of the $800,000 Asset Described in Question

question 78

Multiple Choice

If the lease payments of the $800,000 asset described in Question 57 were $210,000, first payment occurring at the beginning of the first year when the lease is signed, how would the lessee treat these payments in his financial lease analysis? His tax rate is 40%.

• A)Lessee would treat each $210,000 payment as a cash outflow
• B)Lessee would deduct these $210,000 payments from his CCA
• C)Lessee would record net cash outflows for five years of $126,000 for leasing
• D)Lessee would amortize the $800,000 over five years and show these inflows

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Definitions:

Payout Percentage

The proportion of earnings distributed to shareholders in the form of dividends, typically expressed as a percentage of net income.

Note Payable

A formal written agreement to pay a specified amount of money, often including interest, by a certain date.

Payout Percentage

The proportion of earnings paid out to shareholders as dividends, usually expressed as a percentage of the company's total net income.