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Alen Company, a lessor, signs a lease agreement for equipment for 3 years. The fair value of the equipment and the equipment cost to the
Alen Company, a lessor, signs a lease agreement for equipment for 3 years. The fair value of the equipment and the equipment cost to the lessor at the inception of the lease are $200,00 each. The estimated economic life of the equipment is 8 years. The estimated residual value of the equipment at the end of the lease is $20,000. The annual rental payment for the first year is $30,000, for the second year is $36,000, and for the third year is $42,000. The lessor uses the straight-line depreciation method. What will be the annual depreciation expense recorded by the lessor at the end of the second year? a. $29,333 b. $18,400 c. $30,667 d. $22,500
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