The Rupert Company leased a machine at the beginning of 2010.The machine, which had cost the lessor $85, 000, was properly capitalized by Rupert at $73, 734.84.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 2015, the machine will be returned to the lessor.Both Rupert and the lessor use the straight-line method of depreciation.What amount of depreciation expense should Rupert record in 2010 for the machine (round calculations up to the nearest dollar)?
A)$14, 600
B)$14, 747
C)$16, 563
D)$17, 000

Question

Quizplus · Accepted Answer

Rupert should record depreciation expense based on the capitalized lease amount of $73,734.84 over the lease term of five years using the straight-line method. Therefore, the annual depreciation expense is $73,734.84 / 5 = $14,746.968, which rounds up to $14,747.

The Rupert Company Leased a Machine at the Beginning of 2010.The