1. Phillips Corporation has entered into a monthly leasing contract for 3 years on an asset with a useful life of 5 years. The asset's estimated fair value is $28,000. The contract requires monthly lease payments of $850. There is no bargain purchase option or transfer of title in the lease contract. The discount rate is 9%. Should Phillips record this as a capital lease?
Select one:
A. Yes, because the lease term makes this a capital lease.
B. No, because the lease contract contains no transfer of ownership.
C. Yes, because the lease payments make this a capital lease.
D. No, because this is an operating lease without a bargain purchase option.
2. Bekah purchases a stock for $95 per share. At the end of the first year, the stock is worth $190, representing a 100% return. At the end of the second year, the stock has declined to $100, representing a 47.4% loss. Calculate the geometric return of this stock.
3.4%
7.14%
2.56%
8.24%