Surplus Mining Company Has Leased a Machine from Craft Machinery

question 87

Multiple Choice

Surplus Mining Company has leased a machine from Craft Machinery Company.The annual payments are $6,000,and the life of the lease is eight years.It is estimated that the useful life of the machine is nine years.How would Surplus Mining record the acquisition of the machine?

• A)The machine would be recorded as an asset with a cost of $48,000.
• B)The company would not record the machine as an asset but would record rent expense of $6,000 per year.
• C)The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for eight years.
• D)The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for nine years.