Kaye Corporation Agreed to Lease a Computer,at Cost,to Lumbar Company

question 42

Multiple Choice

Kaye Corporation agreed to lease a computer,at cost,to Lumbar Company for $36,000 payable each year-end for seven years without a bargain purchase option,or,as an equivalent alternative,for $33,000 per year with a bargain purchase option,after the seventh rental.If the lease is a direct financing lease,and Kaye expects to earn a 12 percent return,the amount of cash Lumbar Company would need to pay for the bargain purchase option is

• A) $30,266.
• B) $26,340.
• C) $21,000.
• D) $9,948.