Question

please answer questions 7

On January 1, 2019 Day Co. leased a new machine from Parr with the following pertinent information: Lease term 6 years $50,000 Annual rental payable at the beginning of each year Useful life of machine Day's incremental borrowing rate 8 years 15% Implicit interest rate in lease (known by Day) 12% Present value of annuity of 1 in advance for 6 periods at 12% 4.61 15% 4.35 The lease passes ownership of the machine to Day at the termination of the lease. The cost of the machine on Parr's accounting record is $375,500. Hint: see bottom of pages 839 - 841 (chapter 15) of your text book for an illustrative example. Please write your answers in the space provided in each question.

Answer 1

7)

Date	Account title	Debit	credit
31 December 2019	Depreciation expense	38417
	Accumulated depreciation-machinery /Machinery		38417

Depreciation expense = cost of machinery /lease term

                                = 230500 /6

                               = 38416.67 (rounded to 38417)