Answered

At Westonci.ca, we make it easy for you to get the answers you need from a community of knowledgeable individuals. Explore thousands of questions and answers from a knowledgeable community of experts on our user-friendly platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

Flimm Company leases an asset over its estimated useful life of six years. At the inception of the lease, the present value of the lease payments is $240,000. The market value of the leased asset is $258,000.
Flimm uses the straight-line method to allocate lease-related assets to accounting periods during which benefits are derived from the leased assets. To allocate the costs of the related asset, Flinn should debit
a) amortization expense for $43,000
b) amortization expense for $40,000
c) depreciation expense for $43,000
d) depreciation expense for $40,000

Sagot :

Answer: amortization expense for $40,000

Explanation:

Based on the question given, we've to choose between the lower of the fair value of the equipment or the present value of the lease payments. Hence, in this case we will choose $240000.

Then, the amortization expense per year will be:

= $240,000 / 6 years

= $40,000

Therefore, the company should debit amortization expense for $40,000.

We appreciate your time. Please come back anytime for the latest information and answers to your questions. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.