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Calculate the depreciation expense amount

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Reference no: EM132991516

Problem - On 1 July 2019, Black Ltd entered into an arrangement to lease a machine from White Ltd. The terms of the lease agreement are as follows:

Lease term (in years) 4

Annual lease payments (commencing 30 June 2020) $120000

Estimated useful life of the machine (in years) 6

Guaranteed residual value at the end of the lease term $77385

Lease liability at inception was calculated at $482993

Black Ltd paid direct legal costs of $8118 to enter into the lease arrangement on 1 July 2019.

Black Ltd intends on returning the machine to White at the end of the lease term. Black Ltd adopts the straight line method of depreciation.

Calculate the depreciation expense amount that should be recognised in Black Ltd's financial statements for the year ended 30 June 2020 in relation to the right-of-use asset.

Reference no: EM132991516

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