On 1/31/Y1, Bailey Company leased a new machine from Sussex Corp. The following data relate...
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Accounting
On 1/31/Y1, Bailey Company leased a new machine from Sussex Corp. The following data relate to the lease transaction at its inception:
Lease term
10 years
Annual rental payable at beginning of each lease year
$50,000
Useful life of machine
15 years
Implicit interest rate
10%
Present value of an annuity of 1 in advance for 10 periods at 10%
6.76
Present value of annuity of 1 in arrears for 10 periods at 10%
6.15
Fair value of the machine
$400,000
Depreciation method
Straight line
The lease has no renewal option, the possession of the machine reverts to Sussex when the lease terminates, and the machine does have alternative uses. The first lease payment of $50,000 is paid at the inception of the lease. What amount does Sussex Corp. report for depreciation expense in year 1?
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