EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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LION Tech leases equipment on January 1, Year One, for
8 years, while the equipment has a total useful life of 8
years. Ownership of the equipment will transfer to the
lessee at the end of the lease term. Lease payments are
$12,000 per year, with the first payment made
immediately. The present value of these payments at the
lessee's incremental borrowing rate of 8 percent is
$65,000. What amount of depreciation expense should
LION Tech recognize for Year One?
a. $0 b. $8,125 c. $10,833 d. $12,000
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Transcribed Image Text:LION Tech leases equipment on January 1, Year One, for 8 years, while the equipment has a total useful life of 8 years. Ownership of the equipment will transfer to the lessee at the end of the lease term. Lease payments are $12,000 per year, with the first payment made immediately. The present value of these payments at the lessee's incremental borrowing rate of 8 percent is $65,000. What amount of depreciation expense should LION Tech recognize for Year One? a. $0 b. $8,125 c. $10,833 d. $12,000
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