King cones leased ice cream-making equipment from ace leasing. ace earns interest under such arrangements at a 6% annual rate. the lease term is eight months with monthly payments of $10,000 due at the end of each month. king cones elected the short-term lease option. what is the effect of the lease on king cones’ earnings during the eight-month term (ignore taxes)?

$80,000

Explanation:

Given that,

Annual interest rate = 6%

Lease term = Eight month

Monthly payment at the end of each month = $10,000

King cones earning reduced by $10,000 per month.

Therefore,

Lease Expense = Monthly payments × Lease term

                         = $10,000 × 8

                         = $80,000

Above is the lease expense for the eight month term, ignoring taxes.

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