Problem regarding to capitalized lease

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Reference no: EM13159028

On January 1, 2008, Carley Corporation signed a five-year non-cancelable lease for equipment. The terms of the lease called for Carley to make annual payments of $60,000 at the end of each year for five years with title to pass to Carley at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Carley uses the straight-line method of depreciation for all of its fixed assets. Carley accordingly accounts for this lease transaction as a capital lease. The minimum lease payments were determined to have a present value of $227,448 at an effective interest rate of 10%.

With respect to this capitalized lease, for 2008 calculate how much Carley should record for both interest expense and depreciation expense.

With respect to this capitalized lease, for 2009 calculate how much Carley should record for both interest expense and depreciation expense (if any):

Reference no: EM13159028

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