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6) Quattro Corporation signed a lease from Cinco Leasing Company of July 1 Year 1, for equipment having a five-year useful life. The lease does
6) Quattro Corporation signed a lease from Cinco Leasing Company of July 1 Year 1, for equipment having a five-year useful life. The lease does not include any option to purchase the equipment at the end of the four-year lease term, nor does it include a provision for ownership transfer. Five equal payments of $10,000 per year are required by the term of the lease, with the first payment due upon signing. Quattros incremental borrowing rate is 8%, but its implicit interest rate is unknown. Present value of an annuity at 8% for 5 years = 3.993 Present value of an annuity at 8% for 4 years = 3.312 On its December 31, 20X3 financial statements, Quatto would display the following amounts in the indicated accounts: Equipment ; Accumulated Depreciation; Lease Payable e) $0;$0;$0 f) $43,120; $5,390; $33,120 g) $43,120; $4,312; $33,120 h) $49,930; $6,241; $39,930 7) Finance Here Sales & Service provides leased-based financing for its full line of commercial generators. Sales of the generators are properly accounted for as operating sales-type leases. Terms of the leases include return of the generators to Finance Here Sales & Service for resale in secondary markets. The company estimates that the non-guaranteed residual values on generators are equal to an average of 10 percent of the historical cost of the generators. Finance Here Sales & Service can expect that: A) Cost of goods sold will be equal to the historical cost of the generators sold. B) Cost of goods sold will be greater than the historical cost of the generators sold. C) Cost of goods sold will be less than the historical cost of the generators sold. D) The relationship of cost of goods sold and the historical cost of the generators cannot be determined. 8) Capius Corporation issued 2000 bonds in $1000 individual denominations. Each bond has twenty detachable warrants. The bonds and warrants were sold at 110. At the time the bond were issued each warrant had a market value to one percent of the face value of one bond. Capius will account for this transaction as: E) Bond payable with an unamortized premium and a credit to Additional Paid In Capital Warrants F) Bond payable with an unamortized premium and a debit to Additional Paid In Capital Warrants G) Bond payable with an unamortized discount and a credit to Additional Paid In Capital Warrants H) Bond payable with an unamortized discount and a debit to Additional Paid In Capital Warrants
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