Gia02 tb chapter 18 - Intermediate Accounting 2E - Gordon - TB PDF

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Intermediate Accounting, 2e (Gordon/Raedy/Sannella)Chapter 18 Accounting for Leases18 Leases: Overview1) In general, the cost of an asset over the life of the lease is lower than if the lessee purchased the asset. Answer: FALSE Diff: 1 Var: 1 Objective: 18. IFRS/GAAP: GAAP AACSB: Reflective thinking...

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Intermediate Accounting, 2e (Gordon/Raedy/Sannella) Chapter 18 Accounting for Leases 18.1 Leases: Overview 1 )I nge ne r al , t hec os tofanas s e tove rt hel i f eoft hel e a s ei sl owe rt hani ft hel e s s e epur c has e dt heas s e t . Ans we r :F ALSE Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 1 I FRS/GAAP:GAAP AACS B:Re fle c t i vet hi nki ng

2 )Whe nac ompanypur c ha s e se qui pme ntbyi s s ui ngal ongt er m not e ,t hei nt e r e s te l e me ntoft hepa yment i st a xde duc t i bl e .Ho we ve r ,i ft hec ompanyl e a s e se qui pme nt , t hee nt i r el e a s epa yme ntma ybet ax de duc t i bl e . Ans we r :TRUE Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 1 I FRS/GAAP:GAAP AACSB:Re fle c t i vet hi nki ng

3 )Thec onc e ptofs ubs t anc eove rf or mc anbea ppl i e dt ol e as e s .Whi c hl e as et e r msa r emos ti mpor t antt o under s t a ndi ngt hee c onomi cs ubs t a nc eoft hel e as ec ont r a c t ? Ans we r :Theamountandt i mi ngofl e as epa yme nt s ;t hel e ngt hoft hel e a s e ;t hee c onomi cl i f eoft hel e as e d a s s e t ; whe t hert hel e as et r ans f er sowne r s hi poft hel e a s e das s e tt ot hel e s s e ea tt hee ndoft hel e as e ; and whe t hert hel e s s e ec a n, andi sl i ke l yt o, buyt hel e as e di t em a tt hee ndoft hel e as e . Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 1 I FRS/GAAP:GAAP AACSB:Re fle c t i vet hi nki ng

18.2 Lease Contracts, Lease Components, and Contract Consideration 1 )Af t e ri de nt i f yi ngal e a s e , bot ht hel e s s e eandt hel e s s ora r er e qui r e dt os e par a t et hevar i ousl e a s ea nd nonl e as ec ompone nt sa ndal l oc a t ec ons i de r a t i ont ot he s ec ompone nt s . Ans we r :TRUE Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

2 )Whe nt he r ea r es e ve r ala s s e t saspar toft hel e as e , onl ys omemus tbes e par a t e l yi de nt i fie d. Ans we r :F ALSE Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

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3 )Whi c hoft hef ol l owi ngas s e t si sal wa ysc ons i de r e das e par a t el e as ec ompone nti nal e a s e ,unl e s st he i mpac tont hefinanc i a ls t a t eme nt sofnots e pa r a t i ngi tf r om t heot he ra s s e t ( s )i si ns i gni fic ant ? A)l and B)s e r vi c e sas s oc i a t e dwi t ht hel e a s e C)f ul l yde pr ec i a t e das s e t s D)Al loft hea bo ve Ans we r :A Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

4 )I nc a s e swher et hes t a nda l onepr i c ei shi ghl yvar i a bl eorunc e r t a i n,t hel es s e ema yus ewha tt ypeof me t hodf orde t e r mi ni ngs t anda l onepr i c e s ? A)mar ke tmet hod B)r e s i dua lmet hod C)c ompone ntme t hod D)Bot hAandCar ec or r e c t . Ans we r :B Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

5 )Whi c hoft hef ol l owi ngi t e msar eno te x ampl e sofi ni t i a ldi r ec tl e a s ec os t s ? A)c ommi s s i ons B)l e galf e e sr e s ul t i ngf r om t hee x e c ut i onoft hel e as e C)c os t st opr e pa r edoc ume nt sa f t e rt hee x e c ut i onoft hel e as e D)Al loft hea bo vear ee xa mpl e sofi ndi r e c tl e as ec os t s . Ans we r :D Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

6 )I ni ns t anc e swher et he r ei snotanobs e r va bl es t anda l ones e l l i ngpr i c e ,t hel e s s ormus tus eanes t i ma t eof t hes t anda l ones e l l i ngpr i c eanda l l oc a t ei tbas e donwhi c hoft hef ol l owi ngme t hods ? A)a dj us t e dma r ke ta s s e s s me nta ppr oac h B)e x pe c t e dc os t pl us a ma r gi na ppr oac h C)r e s i duala ppr oa c h D)anyoft hea boveappr oa c he s Ans we r :D Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

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7 )Al phaCompa nyha st hr e ec ompone nt si nt he i rl e as ea gr e eme nt :t hebui l di ng,t hee qui pme ntandt he mai nt e na nc es e r vi c e . Tot alc ons i de r a t i oni nt hec ont r a c ti s$5 00 , 0 00pe ry e a r .Al phaCompa nyha s i dent i fiedt hef ol l owi ngs t andal onepr i c e s : Compone nt Bui l di ng Equi pme nt Ma i nt enanc e /Se r vi c e T ot a l

St a ndal onePr i c e $4 00, 00 0 10 0, 00 0 50 , 0 00 $ 550 , 000

Ca l c ul a t et heper c e nt a gesa ndal l oc a t et hec ons i de r a t i ont oe a c hc omponent . Ans we r :Ast het ot alc ons i de r a t i oni nt hec ont r ac ti snote qua lt ot hes um oft hes t a nda l onepr i c e s , Al pha Compa nyus e st her e l a t i ves t a ndal onepr i c e st oa l l oc a t et het ot alc ons i de r a t i ont oe ac hc ompone nt .The $ 50 0, 000t ot alc ons i de r a t i oni sal l oc a t e dasf ol l ows : ( Roundpe r c e nt a ge st ot wode c i ma lpl ac e s . )

Compone nt Bui l di ng Equi pme nt Ma i nt enanc e /Se r vi c e T ot a l

S t a ndal one Pr i c e Per c e nt a ge $40 0, 00 0 72 . 7 3% 100 , 0 00 18. 18 % 50 , 0 00 9 . 0 9% $5 50, 00 0

Al l oc a t e d Cons i de r a t i on $ 363 , 650 90, 9 00 45, 45 0 $ 50 0, 000

Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 2 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

18.3 Lease Classifications 1 )Pr e s e ntval ueofl e a s epa yme nt s+Pr e s e ntval ueofgua r a nt e e dorungua r ant ee dr e s i duala s s e t=Fai r va l ueofl e a s e da s s e t+De f e r r e di ni t i aldi r e c tc os t s . Ans we r :TRUE Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

2 )Thei ni t i a ldi r e c tc os t sc annotbede f er r e dandt hel e s s ormus te xpe ns ei ni t i aldi r e c tc os t sa tt hel e as e c omme nc e me nt . Ans we r :F ALSE Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

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3 )I FRSdoe snotc l a s s i f yl e as e sasope r a t i ngandfinanc i nga nddoe snotdi s t i ngui s ht wot ypesofl e as e s . Ra t he r , l e s s e ea c c ount i ngt r e a t me nti st hes amef oral ll e as e sunde rI FRS. Ans we r :TRUE Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:I FRS AACSB:Appl i c a t i onofknowl e dge

4 )TheGr oupI Ic r i t e r i as e e ml i keas i mpl ewa yt oa c hi e vear epor t i ngout c ome . F ASBwa nt e dl e s s or st o r e c ogni zeapr ofita tl e a s ec omme nc e me ntf r om nonope r a t i ngl e as et r e a t me ntduepar t l yt oat hi r dpar t y r e s i dua lval ueguar a nt e e . Ans we r :F ALSE Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

5 )The__ __ ___ _da t ei swhe nt hel e as ea gr e eme nti ss i gne d.The__ ___ ___da t ei st heda t eonwhi c ht he l e s s e ei sa l l owedt obe gi nus i ngt hel e as e da s s e t . A)l e as ei nc e pt i on; l e as ec omme nc e me nt B)l e a s ec ons i de r a t i on;l e a s ec ommenc e me nt C)l e as ei nc e pt i on;l e a s efina l i za t i on D)Bot hAandBar ec or r e c t . Ans we r :A Di ff: 1 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

6 )I ft hel e s s orme e t sa nyoneoft hefiveGr oupIc r i t er i a ,t he nt hel e s s orc l a s s i fie st hel e a s easa ( n) _ __ ___ __. I ft hel e s s orme e t sbot hoft heGr oupI Ic r i t e r i a ,butnoneoft heGr oupIc r i t e r i a , t he nt hel e s s or c l a s s i fie st hel e a s ea sa ( n)_ ___ __ __. I ft het r ans ac t i ondoesnotmee te i t he rt heGr oupIorGr oupI I c r i t e r i a ,t he nt hel e s s orc l as s i fie st hel e as easa ( n)_ __ ___ __ . A)ope r a t i ngl e as e ; di r e c tfina nc i ngl e a s e ; s a l e s t ypel e a s e B)s al e s t ypel e as e ; di r e c tfina nc i ngl e as e ; ope r a t i ngl e as e C)s t andal onepr i c el e as e ;s a l es t ypel e as e ;di r e c tfina nc i ngl e a s e D)di r e c tfinanc i ngl e as e ; ope r a t i ngl e a s e ;s a l es t ypel e a s e Ans we r :B Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

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7 )Pr i ort o20 19, l e s s e e sdi dnoti nc l udet her i ght of us eas s e ta ndt hel e as el i abi l i t yf orope r a t i ngl e a s e son t he i rbal anc es he e t s .Bot hF ASBa ndI ASBwr ot ene ws t anda r dst or e qui r et ha tl e s s e e sne a r l ya l wa ysr e por t a nas s e tandl i a bi l i t yont he i rba l anc es he e t swhe nt he ye nga gei nal e a s et r ans a c t i on.Thi sac c ount i ng r e s ul t si nwhi c hoft hef ol l owi ng ? A)amor er e l i abl ee s t i ma t i onoft hel e as e ' sva l ue B)amor ef a i t hf ulr e pr e s e nt a t i onoft her i ght sandobl i ga t i onsar i s i ngf r om l e as e s C)abe t t erde t e r mi na t i ononwhe t he rt hel e s s orhe l dt her i s ksa ndr e war dsoft hel e as e da s s e t ' sowne r s hi p D)Al loft hea bo ve Ans we r :B Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP/I FRS AACSB:Appl i c a t i onofknowl e dge

8 )Ka t a r anCompanye nt e r si nt oa4 ye a rl e as et r ans ac t i on,wi t hpa yme nt sduea tt hebe gi nni ngofe a c h ye a r . Thel e as epa yme nt sa r e$ 78 , 0 00pe rye a r . Thef ai rval ueoft hel e as e das s e ti s$ 2 90 , 0 00. Thel es s or ' sde f e r r e di ni t i a ldi r e c tc os t sar ee qua lt o$ 24 , 0 00 . Thel es s or ' se s t i ma t eoft heunguar a nt ee dr e s i duala s s e ti s$ 115 , 0 00. Bas e dont heabovei nf or ma t i on,wha ti st hei mpl i c i tr a t ei nt hel e as ef orKa t ar a n? A)1 1. 48% B)21. 8 1% C)1 4. 77% D)16 . 5 4% Ans we r :D Expl ana t i on:Ka t ar ans houl da ppl yt i meva l ueofmone yc onc e pt st oi de nt i f yt het e r msne e dedt os ol ve f ort hei mpl i c i tr a t e . Thepr e s e ntval ue ,PV, i st hepr es e ntva l ueoft hel e as epa yme nt spl ust hee xpe c t e d r e s i dua lval uewhi c he qual st hef ai rva l ueoft hel e as e das s e tpl ust hede f e r r e di ni t i aldi r e c tc os t s : Pr e s e ntVal ueofLe a s ePa yme nt s+Pr e s e ntVal ueofEs t i ma t e dRe s i dualVa l ue =$2 90, 00 0Fa i rVa l ueofLe as e dAs s e t+$ 2 4, 000I ni t i alDi r ec tCos t s=$ 31 4, 000 Thenumbe rofpe r i ods , N, i s4ye a r s . Thepa yme nt se a c hpe r i od,PMT,a r e$ 78 , 000 .Thef ut ur eval ue ,FV,i s t her e s i dualva l ueof$ 11 5, 000 .Us i ngt heRATEf unc t i oni nEx c e l , ( =RATE( 4, 780 00, 31 40 00, 11 50 00, 1) ) , t he i mpl i c i tr a t ei nt hel e as ei s16 . 5 4%. Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

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9 )Ka t a r anCompanye nt e r si nt oa4 ye a rl e as et r ans ac t i on,wi t hpa yme nt sduea tt hebe gi nni ngofe a c h ye a r . Thel e as epa yme nt sa r e$ 68 , 0 00pe rye a r . Thef ai rval ueoft hel e as e das s e ti s$ 2 80 , 0 00. Thel es s or ' sde f e r r e di ni t i a ldi r e c tc os t sar ee qua lt o$ 14 , 0 00 . Thel es s or ' se s t i ma t eoft heunguar a nt ee dr e s i duala s s e ti s$ 125 , 0 00. Bas e dont hei nf or ma t i ona bov e ,wha ti st hei mpl i c i tr a t e ? Ans we r :Ka t a r a ns houl da ppl yt i meva l ueofmone yc onc e pt st oi dent i f yt het e r msne e dedt os ol vef ort he i mpl i c i tr a t e . Thepr es e ntva l ue ,PV,i st hepr es e ntva l ueoft hel e a s epa yme nt spl ust hee x pe c t e dr e s i dual va l uewhi c he qua l st hef ai rva l ueoft hel e a s e das s e tpl ust hede f e r r e di ni t i aldi r e c tc os t s : Pr e s e ntVal ueofLe a s ePa yme nt s+Pr e s e ntVal ueofEs t i ma t e dRe s i dualVa l ue=$28 0, 00 0Fai rVal ueof Le as e dAs s e t+$1 4, 00 0I ni t i alDi r e c tCos t s=$29 4, 00 0.Thenumbe rofper i ods ,N,i s4ye a r s .Thepa yme nt s e a c hpe r i od, PMT,a r e$ 68 , 000 .Thef ut ur ev al ue , FV, i st her e s i dualva l ueof$ 125 , 000 .Us i ngt heRATE f unc t i oni nExc e l( =RATE( 4 , 6 800 0, 29 400 0, 12 500 0, 1) ) , t hei mpl i c i tr a t ei nt hel e as ei s15 . 14%. Di ff: 3 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

1 0)Gr oupIc r i t e r i apr o vi degui danc et oope r a t i onal i zet hec onc e ptofowne r s hi pandc ont r olofa nas s e t . T omee tt heGr oupIc r i t er i a ,at r ans ac t i ononl yne edst ome etoneoft hefiv ec r i t e r i a.Li s tt hos efive c r i t e r i a. Ans we r : 1 . Thel e a s et r a ns f er sowne r s hi poft hel e as e das s e tt ot hel e s s e ea tt heendoft hel e a s et e r m. I ft hel e a s e t r ans f e r sowne r s hi p,t he nt hel e s s e efir m ha s ,i ne s s e nc e , pur c ha s e dt heas s e t . 2 . Thel es s e ei sgi ve nanopt i ont opur c has et heas s e tt ha tt hel e s s e ei sr e as onabl yc e r t a i nt oe x e r c i s e .For e x ampl e , i tmi ghtber e as ona bl yc e r t a i nt ha tt hel e s s e ewoul de x e r c i s eapur c has eopt i oni ft hes pec i fie d pur c ha s epr i c ei swe l lbe l ow t hee xpe c t e dval ueoft hel e as e das s e ta tt hec ompl et i onoft hel e a s et e r m. 3 . Thel e a s et e r mi sf orama j orpar toft heec onomi cl i f eoft heas s e t .I ft hel e a s et e r mpr ovi de st hel e s s e e t heus eandc ont r olo ve rs ubs t ant i al l yal loft heas s e t ' sus e f ull i f e ,t he nt hea gr e eme nts houl dbe c ons i de r e de qui val e ntt opur c has i ngt heas s e t . 4 . Thepr e s e ntva l ueoft hes um oft hel e a s ep a y me nt sa ndanyr e s i d ua lva l uet hel e s s e egua r a nt e e st opa y ( t ha ti snotot he r wi s ei nc l ude di nt hel e a s epa yme nt s )i se qualt os ubs t ant i al l yal loft hea s s e t ' sf ai rval ue . Thepr e s e ntval uec omput a t i oni nc l ude sl e as epa yme nt si nt her ene wa lpe r i ods , i fany .Me e t i ngt hi s c r i t e r i oni mpl i e st ha tt hel e s s e ei spr o vi di ngt hel e s s orc ompe ns a t i ont ha ti se qui va l e ntt ot hepur c ha s eof t heas s e t . 5 . Thel e a s e da s s e ti sofas pe c i a l i z e dna t ur e . Anas s e twi t has pe c i al i z e dna t ur eha snoa l t e r na t i v eus et o t hel es s ora tt hee ndoft hel e a s et e r m.Be c a us et heas s e tha snoa l t e r na t i veus et ot hel e s s or ,i t ss pe c i al i z ed na t ur ei mpl i e st ha tt hel e s s ormus tha v et r ans f er r e dc ont r olo ve rt heas s e tt ot hel e s s e e . Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

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1 1)Li s tt het hr eea ddi t i ona li ndi c a t or st ha tI FRSr e c ogni z esi ndi vi dual l yori nc ombi na t i ont ha tc oul dl e a d t oc l as s i f yi ngal e as easafina nc el e a s e . Ans we r : 1 . Thel es s e ebe ar st hel e s s or ' sl os s e si ft hel e s s e ec a nc e l st hel e as e . 2 . Thel es s e ea bs or bst hegai nsorl os s e sf r om fluc t ua t i onsi nt hef a i rv al ueoft her e s i dua lval ueoft he a s s e t . 3 . Thel es s e ema ye xt e ndt hel e as ef oras e c onda r ype r i oda tar e nts ubs t a nt i a l l ybe l o wt hemar ke tr e nti n ar e ne walopt i on. Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 3 I FRS/GAAP:I FRS AACSB:Appl i c a t i onofknowl e dge

18.4 Accounting for Operating Leases: Lessee and Lessor 1 )Me a s ur i ngt her i ght of us ea s s e ti nc l ude st hef ol l o wi ngc ompone nt s :t hel e a s el i abi l i t yde t e r mi ne das t hef ut ur eva l ueoft her e ma i ni ngl e a s epa yme nt s ,l e as epa yme nt st hel e s s e emake st ot hel es s ora tor be f or et hec omme nc e mentda t e , ar educ t i onf oranyl e a s ei nc e nt i ve st hel es s e er e c e i ve sa nda nyi ni t i a l di r e c tc os t st hel e s s e ei nc ur s . Ans we r :F ALSE Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 4 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

2 )F ora nope r a t i ngl e as e ,t hel e s s e ewi l lr e c or da ( n)___ ___ __a ndana s s oc i a t edl e as el i a bi l i t yont he ba l a nc es he e t . A)i nt a ngi bl eas s e t B)c api t ala dj us t me nt C)c ont r al i a bi l i t ya c c ount D)r i ght of us eas s e t Ans we r :D Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 4 I FRS/GAAP:GAAP/I FRS AACSB:Appl i c a t i onofknowl e dge

3 )Ont hebal anc es he e t ,t hel e a s el i abi l i t yi sme a s ur e das__ __ ___ _. A)t hepr e s e ntva l ueoft hel e as epa yme nt spl ust hepr e s e ntval ueoft heguar a nt ee dr e s i dua lval uei ft he l e s s e egua r a nt e e si t ( i fany) B)t hepr e s e ntva l ueoft hel e a s epa yme nt sl e s st hepr e s e ntval ueoft hegua r a nt e e dr e s i dua lval ue( i fa ny) C)t hef ut ur eva l ueoft hel e as epa yme nt spl ust hef ut ur eval ueoft heguar a nt ee dr e s i dualva l ue( i fany) D)t hepr e s e ntval ueoft hel e a s epa yme nt spl ust hef ut ur eva l ueoft heguar a nt e e dr e s i dualva l ue( i fa ny) Ans we r :A Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 4 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

7 Copyr i ght©2 0 19Pe ar s onEduc a t i on,I nc .

4 )Whi c hoft hef ol l owi ngs t a t e ment si st r ue ? A)Ther i ght of us eas s e ti si nc r e a s e dbypr epai dl e a s epa yme nt s ,butr e duc e dbyl e a s ei nc e nt i ve sa ndt he l e s s e e ' si ni t i aldi r e c tc os t s . B)Ther i ght of us eas s e ti si nc r e a s e dbypr epai dl e a s epa yme nt sa ndt hel e s s e e ' si ni t i a ldi r e c tc os t s ,but r e duc e dbyl e as ei nc e nt i ve s . C)Ther i ght of us ea s s e ti sr e duc e dbyt hel e s s e e ' si ni t i aldi r e c tc os t s , buti nc r e a s e db yl e as ei nc e nt i ve sand pr e pai dl e as epa yme nt s . D)Ther i ght of us ea s s e ti sr e duc e dbypr epai dl e as epa yme nt sandt hel e s s e e ' si ni t i a ldi r e c tc os t s ,but i nc r e a s e dbyl e a s ei nc e nt i ve s . Ans we r :B Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 4 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

5 )Le e wi nBr oke r a gee nt e r si nt oal e as ea gr e e me ntwi t hBumbl eMot or st ol e as ea naut omobi l ewi t haf ai r va l ueof$77 , 000unde ra5 ye a rl e as eonDe c e mbe r2 0, 201 8. Thel e as ec omme nc esonJ anua r y1 ,2 019 ,and Le e wi nwi l lr et ur nt heaut omobi l et oBumbl eonDec e mbe r3 1 ,20 23. Theaut omobi l ehasa ne s t i ma t e d us e f ull i f eof7ye ar s .Lee wi nmadeal e as epa yme ntof$ 10 , 9 00onDe c e mbe r20, 201 8. I na ddi t i on, t he l e as ea gr e e me nts t i pul a t e sa nnualpa yme nt sof$ 10 , 9 00, dueonJ anua r y1of2 019 ,20 20 ,20 21 ,20 22, and 2 02 3.Thei mpl i c i tr a t eoft hel e as ei s7 % andi sknownbyLee wi n.Ther ei snopur c has eopt i on, nol e as e i nc e nt i ve s , nor e s i dua lval ueguar a nt e e s , a ndnot r ans f erofowne r s hi p.Le e wi ni nc ur si ni t i aldi r e c tc os t sof $ 1, 20 0. As s umi ngt ha tt hi si sc l as s i fie dasa nope r a t i ngl e as e , wha ti st heamountoft hel e a s el i a bi l i t yonJ anuar y 1 ,2 019be f or et hel e a s epa yment ? A)$ 47, 82 1 B)$45 , 892 C)$ 44, 69 2 D)$6 4, 200 Ans we r :A Expl ana t i on:Thel e a s el i abi l i t yi sc a l c ul a t e da st hepr e s e ntval ueoft hef ut ur epa yme nt s .Us i ngEx c e l , t he pr e s e ntval ueoft hef ut ur el e as epa yment s ,ba s e donar a t eof7%,5per i ods ,a ndpa yme nt sa tt he be gi nni ngofe ac hpe r i odof$ 10, 90 0, i s$ 47, 82 1. TheEx c e lf or mul a: =PV( 0. 07 , 5 , 1 09 00, 0, 1)=$ 47 , 8 21. Di ff: 2 Va r :1 Obj e c t i ve :1 8 . 4 I FRS/GAAP:GAAP AACSB:Appl i c a t i onofknowl e dge

8 Copyr i ght©2 0 19Pe ar s onEduc a t i on,I nc .

6 )Le e wi nBr oke r a gee nt e r si nt oal e as ea gr e e me ntwi t hBumbl eMot or st ol e as ea naut omobi l ewi t haf ai r va l ueof$71 , 000unde ra5 ye a rl e as eonDe c e mbe r2 0, 201 8. Thel e as ec omme nc esonJ anua r y1 ,2 019 ,and Le e wi nwi l lr et ur nt heaut omobi l et oBumbl eonDec e mbe r3 1 ,20 23. Theaut omobi l ehasa ne s t i ma t e d us e f ull i f eof7ye ar s .Lee wi nmadeal e as epa yme ntof$ 10 , 0 00onDe c e mbe r20, 201 8. I na ddi t i on, t he l e as ea gr e e me nts t i pul a t e sa nnualpa yme nt sof$ 10 , 0 00, dueonJ anua r y1of2 019 ,20 20 ,20 21 ,20 22, and 2 02 3.Thei mpl i c i tr a t eoft hel e as ei s4 % andi sknownbyLee wi n.Ther ei snopur c has eopt i on, nol e...