Using the information below answer the following questions:
The operating lease is a 3-year lease commencing on 1 January 2012 with payments of $20 000 on 31 December in each of the 3 years. Assume the lease had been treated as a capital lease instead of an operating lease (using a 12% discount rate the present value of the lease payments is $48036; the company uses straight line depreciation for its capital leases).
-If the lease is treated as a capital lease,what would be the total expense reported in 2009 related to the lease?

Question

Quizplus · Accepted Answer

The total expense for a capital lease in 2009 includes both the interest expense and the depreciation expense. The interest expense for the first year is 12% of $48,036, which is $5,764. The depreciation expense is the present value of the lease payments divided by the lease term, which is $48,036 / 3 = $16,012. Therefore, the total expense is $5,764 + $16,012 = $21,776.

Using the Information Below Answer the Following Questions