lease equipment from Albany Manufacturing Company. Collectibility of lease paymes is reasonably predictable and no important uncertainties On January 1, 2017, COB C orporation, signs a 8-year noncancelable lease agreement to surround the amount of costs yet The following additional information pertains to this lease to be incurred by the lessor. agreement. (a) The agreement requires equal rental payments of $852,018 at the beginning each (b) The fair value of the equipment on January 1, 2017 is $5,000,000; however, the (c) The (d) At the termination of the lease, the title to the equipment will be transferred to the (e) COB's incremental borrowing rate is 12% per year. Albany Manufacturing set the year. book value to Albany Manufacturing is $4,000,000. COB lessee. equipment has an estimated economic life of 10 years, with no residual value. depreciates similar equipment on the straight-line method. annual rental to insure a 10% rate of return. The implicit rate of the lessor is unknown by COB. (0 The agreement also requires that COB pay $5,000 of executory costs related to taxes on the property 1. From the lessee's viewpoint, what type of lease exists in this case? A. Capital lease. B. Operating lease. C. Direct-financing lease. D. Sales-type lease. From the lessor's viewpoint, what type of lease exists in this case? A. Capital lease. B. Operating lease. C. Direct-financing lease. D. Sales-type lease. 2. -. What is the amount of the minimum annual lease payment? A. $591,801. B. $852,018. C. $857,018. D. None of the above. The answer is 4. COB would record "depreciation expense" on this equipment in 2017 of A. $625,000. B. $500,500. C. $400,000. D. None of the above. The answer is 5. Albany Manufacturing would record "cost of goods sold" on this transaction of A. $1,000,000 B. $3,300,000. C. $4,000,000. D. None of the above. The answer is