On January 2, 2016, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment. Nori accounted for the acquisition as a capital lease for $240,000, which includes a $10,000 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 $20,000 at the end of its 8-year life. Nori regularly uses straight-line depreciation on similar equipment. For the year ended December 31, 2016, what amount should Nori recognize as depreciation expense on the leased asset? a. $27,500 b. $30,000 c. $48,000 d. $46,000
On January 2, 2016, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment. Nori accounted for the acquisition as a capital lease for $240,000, which includes a $10,000 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 $20,000 at the end of its 8-year life. Nori regularly uses straight-line depreciation on similar equipment. For the year ended December 31, 2016, what amount should Nori recognize as depreciation expense on the leased asset? a. $27,500 b. $30,000 c. $48,000 d. $46,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
Related questions
Question
On January 2, 2016, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment. Nori
accounted for the acquisition as a capital lease for $240,000, which includes a $10,000 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 $20,000 at the end of its 8-year life. Nori regularly uses straight-line
on similar equipment. For the year ended December 31, 2016, what amount should Nori recognize as
depreciation expense on the leased asset?
a. $27,500
b. $30,000
c. $48,000
d. $46,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning