Problem 3. When Hector moved into his newly leased space, he purchased office furniture and hung art, all of which cost him $5,000. He estimated the furniture and art would have a 5-year useful life before he would want to replace with new furniture and art. He was struggling because although the useful lives were 5 years, his lease was only for 1 year: over what time period should he depreciate his office furniture?

1. Discuss the options you see for Hector to depreciate his assets. Will these options impact his monthly income and operating cash flows? Over what period would you depreciate the assets?
2. Using the BSE format, record the depreciation expense for the first month Hector is using the assets.