On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line depreciation on similar equipment. For the year ended December 31, 2021, what amount should RM recognize as depreciation expense on the leased asset?
On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line depreciation on similar equipment. For the year ended December 31, 2021, what amount should RM recognize as depreciation expense on the leased asset?
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 62P
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On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line
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