if a lease agreement specifies that ownership will transfer at the end of the lease should i depreciate by the economic life of the asset since the lessor wont be receiving the asset back?
if a lease agreement specifies that ownership will transfer at the end of the lease should i depreciate by the economic life of the asset since the lessor wont be receiving the asset back?
Homework Answers
Solution:
Yes, if ownership is transferred at the end of lease term, then leased asset should be depreciated over the economic life of the asset. However if ownership is not transferred then leased asset will be amortized over the lease terms.
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if a lease agreement specifies that ownership will transfer at the end of the lease should i depreciate by the economic life of the asset since the lessor wont be receiving the asset back?
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Sheffield Corporation entered into a lease agreement on January
1, 2017, to provide Pharoah Company with a piece of machinery. The
terms of the lease agreement were as follows.
1.
The lease is to be for 3 years with rental payments of $13,700
to be made at the beginning of each year.
2.
The machinery has a fair value of $65,000, a book value
(depreciable base for the lessor) of $40,000, and an economic life
of 8 years.
3.
At...
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