What amount should abc co recognize as depreciation

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Problem 1: On January 1, 2019, ABC Co. entered into a 5-year lease for a construction equipment. ABC Co. accounted for the acquisition as a finance lease for P2,400,000, which includes a P100,000 bargain purchase option. At the end of the lease, ABC Co. expects to exercise the bargain purchase option. ABC Co. estimates that the equipment's fair value will be P200,000 at the end of its 8-year life. ABC Co. regularly uses straight-line depreciation on similar asset. For the year ended December 31, 2019, what amount should ABC Co. recognize as depreciation expense on the leased asset?

Reference no: EM132776278

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