On January 1, 2021, Nori Mining Company (lessee) entered into a 5 year lease for drilling equipment. Nori accounted for the acquisition as a finance lease for P2,400,000, including a P100,000 bargain purchase option. At the end of the lease, Nori expects to exercise the bargain purchase option. Nori estimates that the equipment’s fair value will be P200,000 at the end of its 8 year life. Nori regularly uses the straight line method of depreciation on similar equipment.
On January 1, 2021, Nori Mining Company (lessee) entered into a 5 year lease for drilling equipment. Nori accounted for the acquisition as a finance lease for P2,400,000, including a P100,000 bargain purchase option. At the end of the lease, Nori expects to exercise the bargain purchase option. Nori estimates that the equipment’s fair value will be P200,000 at the end of its 8 year life. Nori regularly uses the straight line method of depreciation on similar equipment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2021, Nori Mining Company (lessee) entered into a 5 year lease for drilling equipment. Nori accounted for the acquisition as a finance lease for P2,400,000, including a P100,000 bargain purchase option. At the end of the lease, Nori expects to exercise the bargain purchase option. Nori estimates that the equipment’s fair value will be P200,000 at the end of its 8 year life. Nori regularly uses the
1. For the year ended December 31, 2021, what amount should Nori recognize as depreciation expense on the leased asset?
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