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Equipment can be leased out for $2,400 a year for four years and then returned to its manufacturer for $100 of scrap value. What is the income from leasing?
A$2,500
B$9,600
C$9,700
D$9,800
Answer & Solution
Correct answer: C. $9,700
1. Lease revenue is $2,400 a year for four years, which is $9,600.
2. Scrap proceeds of $100 arrive at the end of the lease period.
3. No commission or restoration cost is charged to this option alone.
4. Income under the lease option is $9,600 plus $100, which is $9,700.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 9.4 Lease or Sell Equipment_
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