On January 1, 2018, ABC Company leased equipment from Young Leasing Company. The

Question

 On January 1, 2018, ABC Company leased equipment from Young Leasing Company. The term of the lease is ten years and requires payments of $100,000 every January 1, with the first payment being due on January 1, 2018. The interest rate on the lease is 10%. Assume the lease is classified as a capital lease and the leased asset will be depreciated using the double-declining balance method. 

 Calculate the amount of accumulated depreciation related to the leased asset that would be shown in ABC Company's December 31, 2019 balance sheet. Enter your answer with two places after the decimal point (i.e., $123,987.60). 

Explanation / Answer

PV where n = 10 and I =10%

100,000 * 6.75902   = 675,902

DDB rate = 1/10*2 = 20%

2018   675,902 @20%     = 135,180.40

2019 540,721.60@20% = 108,144.32

So Depreciation for 2019 = 108,144.32

PV where n = 10 and I =10%

100,000 * 6.75902   = 675,902

DDB rate = 1/10*2 = 20%

2018   675,902 @20%     = 135,180.40

2019 540,721.60@20% = 108,144.32

So Depreciation for 2019 = 108,144.32

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