Fox Co. leased equipment to Owl Co. under a noncancelable lease that met all nec

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Fox Co. leased equipment to Owl Co. under a noncancelable lease that met all necessary capital lease criteria for both parties. For each of the parties in this lease, will depreciation expense & interest revenue, respectively, be recorded? Fox Co.: No & Yes; Owl Co.: Yes & No Fox Co.: No & No; Owl Co.: Yes & Yes Fox Co.: Yes & Yes; Owl Co.: Yes & No Fox Co: Yes & Yes; Owl Co.: No & No



On January 1, 2019, Owl, Inc. signed a 5-year non-cancellable lease for a new machine with a fair value of $160,000, requiring $20,000 annual payments at the beginning of each year. The machine had a useful life of 7 years, with no salvage value. Title did not pass to Owl, nor was there any bargain purchase option. Owl uses straight-line depreciation for all of its plant assets. Aggregate lease payments had a present value on January 1, 2019 of $120,000 based on an appropriate interest rate. For 2019, Owl should record depreciation (amortization) expense for the leased machine under U.S. GAAP at: $0 $32,000 $24,000 $17,143
Fox Co. leased equipment to Owl Co. under a noncancelable lease that met all necessary capital lease criteria for both parties. For each of the parties in this lease, will depreciation expense & interest revenue, respectively, be recorded? Fox Co.: No & Yes; Owl Co.: Yes & No Fox Co.: No & No; Owl Co.: Yes & Yes Fox Co.: Yes & Yes; Owl Co.: Yes & No Fox Co: Yes & Yes; Owl Co.: No & No



On January 1, 2019, Owl, Inc. signed a 5-year non-cancellable lease for a new machine with a fair value of $160,000, requiring $20,000 annual payments at the beginning of each year. The machine had a useful life of 7 years, with no salvage value. Title did not pass to Owl, nor was there any bargain purchase option. Owl uses straight-line depreciation for all of its plant assets. Aggregate lease payments had a present value on January 1, 2019 of $120,000 based on an appropriate interest rate. For 2019, Owl should record depreciation (amortization) expense for the leased machine under U.S. GAAP at: $0 $32,000 $24,000 $17,143
Fox Co. leased equipment to Owl Co. under a noncancelable lease that met all necessary capital lease criteria for both parties. For each of the parties in this lease, will depreciation expense & interest revenue, respectively, be recorded? Fox Co.: No & Yes; Owl Co.: Yes & No Fox Co.: No & No; Owl Co.: Yes & Yes Fox Co.: Yes & Yes; Owl Co.: Yes & No Fox Co: Yes & Yes; Owl Co.: No & No



On January 1, 2019, Owl, Inc. signed a 5-year non-cancellable lease for a new machine with a fair value of $160,000, requiring $20,000 annual payments at the beginning of each year. The machine had a useful life of 7 years, with no salvage value. Title did not pass to Owl, nor was there any bargain purchase option. Owl uses straight-line depreciation for all of its plant assets. Aggregate lease payments had a present value on January 1, 2019 of $120,000 based on an appropriate interest rate. For 2019, Owl should record depreciation (amortization) expense for the leased machine under U.S. GAAP at: $0 $32,000 $24,000 $17,143 On January 1, 2019, Owl, Inc. signed a 5-year non-cancellable lease for a new machine with a fair value of $160,000, requiring $20,000 annual payments at the beginning of each year. The machine had a useful life of 7 years, with no salvage value. Title did not pass to Owl, nor was there any bargain purchase option. Owl uses straight-line depreciation for all of its plant assets. Aggregate lease payments had a present value on January 1, 2019 of $120,000 based on an appropriate interest rate. For 2019, Owl should record depreciation (amortization) expense for the leased machine under U.S. GAAP at: $0 $32,000 $24,000 $17,143

Explanation / Answer

1. In case of Finance Lease , Lessor recgnises the Interest revenue whilr the lesse recognises the Depreciation expense

Hence Correct answer is a. Fox Co.: No & Yes; Owl Co.: Yes & No

2.The lease here is a operating lease

Hence, Lessee would not record any Depreciation Expense

a. $0

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