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What amount should be recorded as depreciation expense

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Question - At the beginning of current year, Cole Company signed an eight-year non-cancelable lease for a new machine, requiring P750,000 annual payments at the beginning of each year.

The machine has a useful life of 12 years with residual value of P300,000. Title passes to Cole Company at the lease expiration date. Cole Company used straight-line depreciation for all plant assets. Aggregate lease payments have a present value of P5,400,000 based on an appropriate rate of interest.

What amount should be recorded as depreciation expense of the right of use asset for the current year?

Reference no: EM133058207

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