On January 1, 2020, Abbvie Inc. leased several computers under a three-year operating lease agreement from International Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by International Leasing on January 1, 2020 at a cost of $90,000 and were expected to have a useful life of five years with no residual value.

What is the sum of International Leasings debit entries on June 30, 2020? Consider lease payments and depreciation.

	a.	$0
	b.	$11,000
	c.	$10,000
	d.	$20,000
	e.	$19,000

Liberty Inc. routinely leases equipment made by competitors and reverse-engineers design features in its own products. The reverse-engineering process is part of Libertys 6-month product development cycle and involves disassembling then later reassembling the equipment. LeaseUSA leases such equipment to Liberty under a 12-month lease term. The payments have a fair value of $1,000,000 and the equipment has a fair value of $4,000,000. At the end of the lease term, Liberty has the option to purchase the equipment for $2,000,000, which is less than its expected fair value at that time. There is no internal use for the competitor equipment at the end of Libertys product development cycle, and Libertys management focuses solely on the manufacture and sale of its own equipment. Management also wishes to minimize liabilities reported on the balance sheet. In light of the above, what is the value of Libertys debit entry on the day the lease contract starts?

	a.	$1,000,000
	b.	$2,000,000
	c.	$0
	d.	Not enough information to decide.
	e.	$4,000,000

Tarkan Inc. leases an asset with the following information:

Fair value of the asset: $400,000.

Useful life of the asset: 6 years with no economic salvage value.

Lease term is 3 years.

Annual lease payments (starting from beginning of year) are $140,000.

Implicit interest rate: 6%.

Tarkan can purchase the asset at the end of the lease period for $100,000.

What type of lease is this?

	a.	Short term
	b.	Long term
	c.	Sale-Leaseback
	d.	Finance
	e.	Operating

At the beginning of 2019, Toms Retail had a deferred tax asset account due to a temporary book-tax difference of $160 million in a liability for estimated expenses. Taxable income for 2019 is $100 million and the tax rate is 25%. At the end of 2019, Toms Retail also realized that only quarter of deferred tax assets can be eventually realized. What will Toms Retails income tax expense be for 2019?

	a.	$45 million
	b.	$25 million
	c.	None of the choices are correct.
	d.	$55 million
	e.	$35 million