On January 1,2015,Cole Corporation entered into a ten-year lease agreement.The following summarizes the agreement:
• Payments of $30,000 are due at the beginning of each year;the first payment was made on January 1,2015.
• The leased asset has an estimated useful life of 15 years.
• Title to the leased asset is transferred to Cole at the end of the lease term.
• The implicit interest rate known by Cole is 10%.
• Cole's incremental borrowing rate is 12%.
• Cole uses the straight-line depreciation method.
• The asset's estimated salvage value is $50,000 after 10 years and is $15,000 after 15 years.
Required:
1.Determine the interest expense associated with the lease for the year ended December 31,2015.
2.Determine the depreciation expense for the year ended December 31,2015.

Question

Quizplus · Accepted Answer

The Answer of On January 1,2015,Cole Corporation entered into a ten-year lease agreement.The following summarizes the agreement:
• Payments of $30,000 are due at the beginning of each year;the first payment was made on January 1,2015.
• The leased asset has an estimated useful life of 15 years.
• Title to the leased asset is transferred to Cole at the end of the lease term.
• The implicit interest rate known by Cole is 10%.
• Cole's incremental borrowing rate is 12%.
• Cole uses the straight-line depreciation method.
• The asset's estimated salvage value is $50,000 after 10 years and is $15,000 after 15 years.
Required:
1.Determine the interest expense associated with the lease for the year ended December 31,2015.
2.Determine the depreciation expense for the year ended December 31,2015.

On January 1,2015,Cole Corporation Entered into a Ten-Year Lease Agreement