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:

Quartzite

A hard, metamorphic rock formed from sandstone through heating and pressure, known for its durability and use in construction.

Marble

A metamorphic rock that is formed from the recrystallization of limestone or dolomite, often used in sculpture and as building material.

Schist

A shiny, foliated, metamorphic rock generally containing abundant visible crystals of mica.

Thrust Fault

A type of fault where the hanging wall moves up relative to the footwall, often associated with the compression of Earth's crust.