Exhibit 20-4 on January 1, 2016, Average Leasing Company Entered into a into a Direct

Multiple Choice

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:

-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