Question

On January 1, year 1, Eber Co. leased equipment under a four-year capital lease. The present value of minimum lease payments is $348,680. The equipment had a five-year economic life and a $20,000 guaranteed residual value. The equipment reverted to the lessor at the end of the lease. What amount should Eber report as depreciation expense at December 31, year 1?

Answer 1

$87,170

Step-by-step explanation:

Calculation to determine What amount should Eber report as depreciation expense at December 31, year 1

Using this formula

Depreciation expense at December 31, year 1=Present value of minimum lease payments /Capital lease years

Let plug in the morning

Depreciation expense at December 31, year 1= $348,680 / 4 years

Depreciation expense at December 31, year 1= $87,170

Therefore Depreciation expense at December 31, year 1 is $87,170