Phil Company Leased a Machine to Its 100%-Owned Subsidiary, Scout

question 23

Multiple Choice

Phil Company leased a machine to its 100%-owned subsidiary, Scout Company.The direct financing lease required annual lease payments in advance of $2,319 for 5 years.The present value of the minimum lease payments at 8% interest is $10,000.The adjustment of assets and liabilities needed to prepare a consolidated balance sheet is to eliminate the:

• A)​asset leased.
• B)​asset leased and the obligation under the capital lease.
• C)​obligation under the capital lease and the present value of the minimum lease payments.
• D)​obligation under the capital lease.

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Definitions:

Confidence

The degree of optimism or pessimism that consumers and businesses feel about the overall state of the economy and their personal financial situations, influencing their spending and investment decisions.

Constructing Models

The process of creating representations of real-world phenomena in order to test theories, predict outcomes, and analyze scenarios.

Simplifying Assumptions

Basic assumptions made to make complex economic models more understandable and manageable by ignoring certain factors.

Mathematical Equations

Symbolic representations of relationships between variables or quantities, defined by mathematical operations.