Use the following to answer questions
Refer to the following lease amortization schedule.The five payments are made annually starting with the inception of the lease.A $2,000 bargain purchase option is exercisable at the end of the five-year lease.The asset has an expected economic life of eight years.

-What would the lessee record as annual depreciation on the asset using the straight-line method,assuming no residual value?
A)$3,325.
B)$6,920.
C)$4,325.
D)$5,320.

Question

Use the following to answer questions 
Refer to the following lease amortization schedule.The five payments are made annually starting with the inception of the lease.A $2,000 bargain purchase option is exercisable at the end of the five-year lease.The asset has an expected economic life of eight years.
 
-What would the lessee record as annual depreciation on the asset using the straight-line method,assuming no residual value?
A)$3,325. 
B)$6,920. 
C)$4,325. 
D)$5,320.

Quizplus · Accepted Answer

The asset has a total depreciable cost of $16,625 ($83,125 - $2,000 bargain purchase option). Using the straight-line method, the annual depreciation would be $3,325 ($16,625 / 5 years).

Use the Following to Answer Questions