Blue Manufacturing produces lathes at an inventory cost of $25,000 each that sell for $32,000 each. For credit-approved customers, Blue leases the lathes for $8,500 per year for five years. The lathes are guaranteed to last four years and generally have a six-year life. Collection is predictable and reasonably assured. Additionally, the lessor is aware of all costs to be incurred under the lease that will not be reimbursed by the lessor. Blue Manufacturing treats a lathe lease as a/an:

a. Direct-financing lease.
b. Operating lease.
c. Ordinary capital lease.
d. Sales-type lease.

Paar corporation bought 100 percent of kimmel, inc., on january 1, 2012. on that date, paar’s equipment (10-year life) has a book value of $420,000 but a fair value of $520,000. kimmel has equipment (10-year life) with a book value of $272,000 but a fair value of $400,000. paar uses the equity method to record its investment in kimmel. on december 31, 2014, paar has equipment with a book value of $294,000 but a fair value of $445,200. kimmel has equipment with a book value of $190,400 but a fair value of $357,000. the consolidated balance for the equipment account as of december 31, 2014 is $574,000. what would be the impact on consolidated balance for the equipment account as of december 31, 2014 if the parent had applied the initial value method rather than the equity method? the balance in the consolidated equipment account cannot be determined for the initial value method using the information given. the consolidated equipment account would have a higher reported balance. the consolidated equipment account would have a lower reported balance. no effect: the method the parent uses is for internal reporting purposes only and has no impact on consolidated totals.