Nichols Fruits leased farm equipment from King Machinery on January 1, 2016. The present value of the lease payments discounted at 10% was $40 million. Ten annual lease payments of $6 million are due at the beginning of each year beginning January 1, 2016. King had constructed the equipment recently for $33 million. With this lease agreement, control is considered to be transferred to the lessee at the beginning of the lease. The total increase in earnings (pretax) in King's 2016 income statement would be:
A) $3.4 million.
B) $6.0 million.
C) $17.0 million.
D) $20.4 million.
Answer: D
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Accounting Chapter 15
- How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?
- Noncumulative preferred dividends in arrears
- Dividends are not paid on
- Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called
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- The payout ratio can be calculated by dividing
- The rate of return on common stock equity is calculated by dividing
- Which one of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements?
- What effect does the issuance of a 2-for-1 stock split have on each of the following?
- A feature common to both stock splits and stock dividends is
- The balance in Common Stock Dividend Distributable should be reported as a(n)
- At the date of declaration of a small common stock dividend, the entry should not include
- The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the
- Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?
- The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding
- Which dividends do not reduce stockholders' equity?
- If management wishes to "capitalize" part of the earnings, it may issue a
- A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to
- A dividend which is a return to stockholders of a portion of their original investments is a
- Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2010, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a
- Which of the following statements about property dividends is not true?
- Cash dividends are paid on the basis of the number of shares
- An entry is not made on the
- At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the
- Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as
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