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

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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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