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Mariana [72]
2 years ago
15

Breonna Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, con

tain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90 % of the fair value of the assets leased. The annual lease payment is $41,000 at the beginning of each year, and Breonna's incremental borrowing rate is 8%, which is the same as the lessor's implicit rate. The agreement is properly classified as an operating lease. Assume the equipment is carried at a cost of $280,000 and the Straight-Line method for depreciation is used. In preparing the necessary journal entries for Falls Company (the lessor) for 2020, the "Leased Equipment" account should include a debit for depreciation expense of ___________. (Enter the answer with NO commas or dollar signs!)
Business
1 answer:
maksim [4K]2 years ago
7 0

Answer:

$35,000

Explanation:

Since this is an operating lease (short lease term, no transfer of ownership, and low present value of lease payments), the lessor has to record a depreciation expense, but the lessee only considers lease payments as operating costs (no depreciation expense or lease liability should be recognized).

Depreciation expense per year under the straight line method = asset cost / useful life = $280,000 / 8 years = $35,000

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Oksana_A [137]

Answer:

$23,000

Explanation:

Total dividends = $138,000 (Paid in 2020)

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= $23,000

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4 0
3 years ago
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Anuta_ua [19.1K]

Answer: True

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