Refer to the Following Lease Amortization Schedule

question 7

Multiple Choice

Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,000 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.

-What is the total interest paid over the term of the lease?

• A) $42,000.
• B) $8,200.
• C) $7,400.
• D) $3,460.

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Definitions:

Job-Order Costing System

A cost accounting system that assigns manufacturing costs to an individual product or batches of products, often used when products are distinctly different.

Overapplied

A situation where the allocated manufacturing overhead cost is more than the actual overhead cost incurred.

Underapplied

A condition where allocated manufacturing overhead for a period is less than the actual overhead incurred, causing unabsorbed overhead costs.

Job-Order Costing System

A cost accounting system that assigns costs to specific batches or job orders, making it easier to track the cost of producing each item or batch.