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Accounting for Leases

On January 2, 2004, Gonzalez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $90,000 starting at the end of the first year, with title passing to Gonzalez at the expiration of the lease. Gonzalez treated this transaction as a capital lease. The drill press has an estimated useful life of 15 years, with no salvage value. Gonzalez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $540,000, based on implicit interest of 10%.

In its 2004 income statement, what amount of interest expense should Gonzalez report from this lease transaction?

In its 2004 income statement, what amount of depreciation expense should Gonzalez report from this lease transaction

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In its 2004 income statement, what amount of interest expense should Gonzalez report from this lease transaction?

The interest ...

Solution Summary

The solution explains how to calculate the amount of depreciation and interest expense under lease accounting

$2.19