|Posted: 27 May 2009 at 10:29 | IP Logged
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??