Modesto,Inc

question 38

Multiple Choice

Modesto,Inc.leased machinery with a fair value of $250,000 from Layton Machine Co.on December 31,2014.The contract is a six-year noncancelable lease with an implicit interest rate of 10 percent.The lease requires annual payments of $50,000 beginning December 31,2014.Modesto appropriately accounted for the lease as a capital lease.Modesto's incremental borrowing rate is 12 percent.Assuming the present value of an annuity due of 1 for 6 years at 10 percent is 4.7908 and the present value of an annuity due of 1 for 6 years at 12 percent is 4.6048,what is the lease liability that Modesto should report on the balance sheet at December 31,2014?

• A) $189,540
• B) $200,000
• C) $230,240
• D) $239,540

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Definitions:

Program Administrators

Individuals responsible for overseeing and managing the implementation and operation of a program or project.

SMART

An acronym for Specific, Measurable, Achievable, Relevant, and Time-bound, often used as criteria to guide setting objectives and goals, particularly in project management and personal development.

Measureable

Capable of being quantified or expressed as a numerical value.

Qualitative Research Methods

A methodology that focuses on understanding human behavior and the reasons that govern such behavior, through methods like interviews, observations, and analysis of textual material.