1. Flop Co. leased office premises to Flim, Inc. for a five-year term beginning January 2, year 1. Under the terms of the operating lease, rent forthe first year is $8,000 and rent for years two through five is $12,500 per annum. However, as an inducement to enter the lease, Flop grantedFlim the first six months of the lease rent-free. In its December 31, year 1 income statement, what amount should Flop report as rental income

Question options:

	$8,000
	$12,000
	$10,800
	$11,600

2. On January 1, year 1, Floozy Co. signed a seven-year lease for equipment having a ten-year economic life. The present value of the monthlylease payments equaled 80% of the equipment's fair value. The lease agreement provides for neither a transfer of title to Floozy nor a bargain purchase option. In its year 1 income statement Floozy should report?

Question options:

a	Lease amortization equal to one-seventh of 80% of the equipment's fair value.
b	Lease amortization equal to one-tenth of the equipment's fair value.
c	Rent expense equal to the year 1 lease payments less interest expense.
	Rent expense equal to the year 1 lease payments. A cash flow of $800,000 may be received by CB Company in one year, two years, or three years, with probabilities of 30%, 60%, and 20%, respectively. The rate of interest on default risk-free investments is 8%. Required: What is the expected present value of CB's cash flow? Round your answers to the nearest whole dollar.