Posted: 03 May 2009 at 12:39 | IP Logged
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On January 1 of the current year, Tell Co. leased equipment from Swill Co. under a nine-year sales-type lease. The equipment had a cost of $400,000, and an estimated useful life of 15 years. Semiannual lease payments of $44,000 are due every January 1 and July 1. The present value of lease payments at 12% was $505,000, which equals the sales price of the equipment. Using the straight-line method, what amount should Tell recognize as depreciation expense on the equipment in the current year?
Now, I dep. usuing the 15 year asset life ad the person will 'OWNS' the asset. Though the answer uses 9 to calculate, can anyone explain what is wrong with my logic?
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