Question
On January 2, 2018, Blossom, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $280000 starting
On January 2, 2018, Blossom, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $280000 starting at the beginning of the first year, with title passing to Blossom at the expiration of the lease. Blossom treated this transaction as a capital lease. The drill press has an estimated useful life of 15 years, with no salvage value. Blossom uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $1720479, based on implicit interest of 10%. In its 2018 income statement, what amount of depreciation expense should Blossom report from this lease transaction?
| $114699 |
| $142699 |
| $280000 |
| $172048 |
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