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What amount should maria recognize as a depreciation expense

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Problem 1: On January 2, year 1, Maria Mining Co. (lessee) entered into a five-year lease for drilling equipment. Maria accounted for the acquisition as a finance lease for 240,000, which includes a 10,000 bargain purchase option. At the end of the lease, Maria expects to exercise the bargain purchase option. Maria estimates that the equipment's fair value will be 20,000 at the end of its eight-year-life. Maria regularly uses straight-line depreciation on similar equipment. For the year ended December 31, year 1, what amount should Maria recognize as a depreciation expense on lease asset?

a. 48,000

b. 46,000

c. 30,000

d. 27,500.

Reference no: EM132881024

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