Exhibit 20-4 On January 1, 2016, Average Leasing Company entered into a direct financing lease with a lessee, Lenny Company. The lease agreement calls for five equal annual payments of $75,000 at the beginning of each year with the first payment due on January 1, 2016. The leased property has an estimated residual value of $10,000, which Lenny does not guarantee. The property remains the property
of Average at the end of the lease term. Average desires a 12% rate of return. Present value factors for a 12% interest rate are as follows: Present value of $1 for n = 1 0.892857 Present value of $1 for n = 5 0.567427 Present value of an ordinary annuity for n = 5 3.604776 Present value of an annuity due for n = 5 4.037349 ? Refer to Exhibit 20-4. What is the amount of the credit to Unearned Interest: Leases to be recorded by Average Leasing on January 1, 2016 (round the answer to the nearest dollar)?
A) $82,199
B) $66,525
C) $72,199
D) $76,525
D
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Which of the following statements is false regarding the evaluation of alternatives?
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What can an insured do under a homeowners policy to provide insurance coverage for specific
valuable items, such as a rare and valuable painting? A) Add a personal effects floater to the policy covering the artwork B) Add the standard artwork addendum to the policy C) Obtain an independent appraisal and submit it to the insurer D) Nothing in particular; it will be covered within the overall policy limits, but that might leave less coverage for other items E) Execute an appurtenant structure substitution agreement in which the coverage for the rare item will take the place of coverage for appurtenant structures