Question
Bob the Builder purchases an equipment, which will last Box1: years with no residual value on April 1, Year 7. The company issues an $800,000,
Bob the Builder purchases an equipment, which will last Box1: years with no residual value on April 1, Year 7. The company issues an $800,000, four-year, non-interest bearing note for the equipment when the prevailing market interest rate for notes of this nature is 8%. The company will pay off the note in four $200,000 installments on each March 31, starting March 31, Year 8. The company adopts mid-month convention for depreciation and depreciation expense is recognized once at the end of the fiscal year, which is December 31, using straight-line method.
1)Calculate depreciation expense to be recognized on December 31, Year 7.
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