Answered

IDNLearn.com is your go-to platform for finding accurate and reliable answers. Our experts are available to provide accurate, comprehensive answers to help you make informed decisions about any topic or issue you encounter.

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 are delighted to have you as part of our community. Keep asking, answering, and sharing your insights. Together, we can create a valuable knowledge resource. Find reliable answers at IDNLearn.com. Thanks for stopping by, and come back for more trustworthy solutions.