The Roger Company leased a machine at the beginning of 2016. The machine was properly capitalized by Roger at $73,735. A lease payment of $16,563 is due at the end of each year. The expected life of the machine is seven years, and the term of the lease is five years. At the beginning of 2021, the machine will be returned to the lessor. Both Roger and the lessor use the straight-line method of depreciation. What amount of depreciation expense should
Roger record in 2016 for the machine round calculations up to the nearest dollar)?

Question

Quizplus · Accepted Answer

Roger should record depreciation expense based on the capitalized cost of the machine ($73,735) over its expected life of seven years, using the straight-line method. The calculation is $73,735 / 7 = $10,533.57, rounded up to the nearest dollar gives $10,534. However, the correct answer provided in the options seems to be a mistake as none of the options match this calculation. Given the options, B) $14,747 is the closest to any reasonable calculation based on the information provided, but it does not accurately reflect the correct depreciation expense based on the given data. This suggests a possible misunderstanding or error in the question or answer options.

The Roger Company Leased a Machine at the Beginning of 2016