Boss Company Currently Leases a Delivery Van from Check Enterprises

question 58

Multiple Choice

Boss Company currently leases a delivery van from Check Enterprises for a fee of $250 per month plus $0.40 per mile.Management is evaluating the desirability of switching to a modern,fuel-efficient van,which can be leased from David,Inc.,for a fee of $600 per month plus $0.05 per mile.All operating costs and fuel are included in the rental fees.Which delivery van would it be economically preferable to lease?

• A)David,Inc.is economically preferable to a lease from Check Enterprises regardless of the monthly use.
• B)Check Enterprises is economically preferable below 1,000 miles per month.
• C)Check Enterprises is economically preferable to a lease from David,Inc.,regardless of the monthly use.
• D)Check Enterprises is economically preferable above 1,000 miles per month.

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Definitions:

Transaction Explanation

A description or rationale provided for each transaction within an accounting system, aiding in understanding and verifying the nature of the transaction.

Income Statement

Also known as profit and loss statement, it details a company’s financial performance, including sales, expenses, and profits over a period.

Owner's Equity Statement

An owner's equity statement is a financial document that shows changes in the equity of a company's owners over a period.

Owner's Capital

The amount of equity a business owner has in the company, representing their investment plus any retained earnings or losses.