ABC Company leased equipment to Best Corporation under a lease agreement that qualifies as a direct finance lease. The cost of the asset is OMR 22,000. The lease contains a bargain purchase option that is effective at the end of the fifth year. The expected economic life of the asset is five years. The lease term is 5 years. The asset is expected to have a residual value of OMR 2,000 at the end of ten years. Using the straight-line method, what would Best record as annual depreciation? Select one: a. OMR 2,000 b. OMR 4,500 c. OMR 5,000 d. OMR 4,000
ABC Company leased equipment to Best Corporation under a lease agreement that qualifies as a direct finance lease. The cost of the asset is OMR 22,000. The lease contains a bargain purchase option that is effective at the end of the fifth year. The expected economic life of the asset is five years. The lease term is 5 years. The asset is expected to have a residual value of OMR 2,000 at the end of ten years. Using the straight-line method, what would Best record as annual depreciation? Select one: a. OMR 2,000 b. OMR 4,500 c. OMR 5,000 d. OMR 4,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Company leased equipment to Best Corporation under a lease agreement that qualifies as a direct finance lease. The cost of the asset is OMR 22,000. The lease contains a bargain purchase option that is effective at the end of the fifth year. The expected economic life of the asset is five years. The lease term is 5 years. The asset is expected to have a residual value of OMR 2,000 at the end of ten years. Using the straight-line method, what would Best record as annual
Select one:
a. OMR 2,000
b. OMR 4,500
c. OMR 5,000
d. OMR 4,000
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