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***PLEASE ANSWER ALL QUESTIONS***

1. Tye Inc. sells computer systems. Tye leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $12 million.

This noncancelable lease had the following terms:

Lease payments: $2,466,754 semiannually; first payment at January 1, 2021;

remaining payments at June 30 and December 31 each year through June 30, 2025.

Lease term: five years (10 semiannual payments).

No residual value; no purchase option.

Economic life of equipment: five years.

Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually.

Fair value of the computers at January 1, 2021: $20 million.

What is the outstanding balance of the lease liability in Lone Star's June 30, 2021, balance sheet? (Round your answer to the nearest whole dollar.)

A) $15,943,154.

B) $17,533,246.

C) $21,000,000.

D) None of these answer choices is correct.

2. An operating lease is characterized by which of the following statements?

A) The lessee reports cash outflows as financing activities.

B) The lessor records depreciation and lease revenue.

C) The lessor transfers title at the end of the lease term.

D) The lessee has an option to purchase the leased assets and is reasonably sure to exercise the option.

3. Inter-period tax allocation creates a result that:

A) Large fluctuations in a company's tax liability are eliminated.

B) The income tax expense is allocated among the income statement items that caused the expense.

C) The income tax expense in the income statement is the sum of the income taxes payable for the year and the changes in deferred tax asset or liability balances for the year.

D) The income tax expense shown in the income statement is equal to the deferred taxes for the year.

4. A deferred tax asset is created by which of the following differences between financial accounting and tax accounting?

A) Unrealized loss from recording inventory impairments.

B) Prepaid expenses.

C) Installment sales for which taxable income recognized when cash is collected.

D) None of these answer choices are correct.

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