On January 3, 2016, the Walters Corporation signed a 10-year non-cancelable lease for manufacturing equipment. The fair value of the equipment at that time was $550,000. At the end of the lease period, the equipment, which has an estimated life of 15 years, will be returned to the lessor. Additional information is below: Lease payments (year-end) $80,000 Walters Corporation's incremental
borrowing rate 10% Lessor's implicit interest rate (known to Walters) 12% Present value factor for an ordinary annuity of 10 years at 10% 6.144567 Present value factor for an ordinary annuity of 10 years at 12% 5.650223 ? Walters should
A) capitalize the equipment at $550,000.
B) capitalize the equipment at $491,565.
C) capitalize the equipment at $452,018.
D) not capitalize the equipment.
D
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Fogel purchased a television set for $900 from Hamilton Appliance. Hamilton took a promissory note signed by Fogel and a security interest for the $800 balance due on the set. It was Hamilton's policy not to file a financing statement until the purchaser defaulted. Fogel obtained a loan of $500 from Reliable Finance, which took and recorded a security interest in the set. A month later, Fogel
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