Kauffman Tire Repair Leased a Machine That Will Enable It

question 32

Multiple Choice

Kauffman Tire Repair leased a machine that will enable it to repair tires found on monster vehicles. The annual payments are $9,000 and the life of the lease is 7 years. It is estimated that the useful life of the machine is 8 years. How would the company record the acquisition of the machine?

• A)The machine would be recorded as an asset with a cost of $63,000.
• 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, $9,000 for 7 years.
• D)The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years.

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Definitions:

Media Monopoly

A market condition in which a single company or group owns all or nearly all of the market for a particular type of media product or service.

Disney

An American multinational entertainment and media conglomerate, known for its film studio, theme parks, and merchandise.

New York Times

An American newspaper based in New York City with worldwide influence and readership, known for its thorough news coverage.

Media Conglomerates

Large corporations that own a vast array of media companies across different types of media outlets, such as television, radio, publishing, movies, and the internet.