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RST Entered into a Direct Financing Lease with ZAB, Which

Question 218

Multiple Choice

RST entered into a direct financing lease with ZAB, which called for seven annual rentals of $3,500 (interest rate 12 percent) to be paid at the end of each year.The lease also contained a bargain purchase option allowing ZAB to purchase the asset for $2,500 after making the seventh annual rental payment.The cost of the asset must have been:


A) $25,631
B) $17,105
C) $27,000
D) $18,473

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