Asset and liability in the financial records

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Reference no: EM13137404

Johntech Inc. leased a new machine having an expected useful life of 30 years from Carbide Co. Terms of the noncancelable 25-year lease were that Johntech would gain title to the property upon payment of a sum equal to the fair market value of the machine at the termination of the lease. Johntech accounted for the lease as a capital lease and recorded an asset and a liability in the financial records. The asset recorded under this lease should properly be amortized over:

a. 5 years (the period of actual ownership).

b. 22.5 years (75 percent of the 30-year asset life).

c. 25 years (the term of the lease).

d. 30 years (the total asset life).

Reference no: EM13137404

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