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On January 1, 20X6, Liberty Corp. (LC) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow: $60,000
On January 1, 20X6, Liberty Corp. (LC) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow: $60,000 $4,000 Lease payment, including the non-lease component Non-lease component (maintenance agreement) included in lease payment Implicit rate in the lease (readily determinable by lessee) Incremental borrowing rate 5% 6% Lease term Economic life of equipment Guaranteed residual value 5 years 6 years $10,000 $8,000 Expected pay-out on residual value guarantee Option to purchase First annual payment due No Jan. 1, 20X6 LC elects to adopt the practical expedient available to report the lease and non-lease components in the contract as a single lease component. The company uses the straight-line method to depreciate its right-of-use assets. What is the amount that NC will record for depreciation of this ROU asset for its year-ended December 31, 20X6? a. $52,168 b. $54,777 c. $55,805 d. $56,118
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