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Company A (lessee) makes a finance lease (5 year contract) with Company B (lessor). The cost of asset is 500 000 and its estimated fair
Company A (lessee) makes a finance lease (5 year contract) with Company B (lessor). The cost of asset is 500 000 and its estimated fair value is 150 000 after first 5 years. Fair value after 10 years is 50 000. The ownership is not transferred to Company A after the contract finishes. The economic life of the asset is 10 years.
How much Company A should depreciate asset when using straight-line method.
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