On January 1/1990 Moul (lessee) entered into a 5-year lease for drilling equipment. Moul accounted for the adquisition as capital lease for $120,000 which include bargain $5,000. At th end of the lease Moul expect to exercice the bargain. Moul estimated FV will be $10,000 at the end of the 8 year life. Moul regulary uses SL depreciation on similar equipment. For Dec-31/90 what amount Moul should recognized as dep. exp on the leased asset?

(a)13,750  (b)15,000 (c)23,000 (d)24,000  Correct (a)

Shouldnt' be depreaciated over the Lesser of Lease Term or Asset life? 8 years or 5 years... They choose 8 years instead of 5 years.  What did I missed??

utesa ... see u are doing silly mistakes.. did u see the word "bargain"

which means "W" of OWNS rt??? and if its is "O" "W" its over the life or asset not leeser of life of asset or the lease time..

this is because u are tired...

:(  I think you are right jrupa.  Thank