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What amount of depreciation will Laguna Madre record

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Question - Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $14,000,000. The lease agreement between SuperByte and Laguna Madre had the follow? terms:

1. The lease is noncancellable.

2. The lease has no residual value or bargain purchase option.

3. The lease term is 8? years; payments are made semiannually.

4. Depreciation is recorded each December 31 using the straight-line approach.

5. The economic life of the equipment is 8 years.

6. The? lessee's incremental borrowing rate and the implicit interest rate are both? 8% annually.

7. The lease payments are $ 1,320, 308semiannually. The first payment is due at the inception of the? lease; subsequent payments are made every July 1 and January 1.

8. The fair value of the equipment at the inception of the lease is $ 16, 000, 000.

Required - What amount of depreciation will Laguna Madre record in its income statement on December 31 of the current? year?

Reference no: EM132867329

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