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Question 16
Lease A does not contain a purchase option, but the lease term is equal
to 90 percent of the estimated economic life of the leased property.
Lease B does not transfer ownership of the property to the lessee by the
end of the lease term, but the lease term is equal to 75 percent of the
estimated economic life of the leased property. How should the lessee
classify these leases?
Question 17
On December 31, 2005, Bit Co. had capitalized costs for a new
computer software product with an economic life of five years. Sales for
2006 were 30 percent of expected total sales of the software. At
December 31, 2006, the software had a net realizable value equal to 90
percent of the capitalized cost. What percentage of the original
capitalized cost should be reported as the net amount on Bit's December
31, 2006 balance sheet?
Question 18
On January 1, 2001, Babson, Inc. leased two automobiles for executive
use. The lease requires Babson to make five annual payments of $13,000
beginning January 1, 2001. At the end of the lease term, December 31,
2005, Babson guarantees the residual value of the automobiles will total
$10,000. The lease qualifies as a capital lease. The interest rate implicit
in the lease is 9%. Present value factors for the 9% rate implicit in the
lease are as follows: Babson's recorded capital lease liability
immediately after the first required payment should be
Question 19
YIV Inc. is a multidivisional corporation which has both intersegment
sales and sales to unaffiliated customers. YIV should report segment