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What is the amount of depreciation expense to be recorded

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Firm A leases equipment from Firm B for 7 years. Firm A will pay $5,000 at the end of every year for the next 7 years. Assume that the discount rate of Firm A is 8%. Also assume that the lease term and the useful life of the equipment are the same. The present value of the equipment lease payments at the inception of the lease is $26,032.

Question 1: What is the amount of depreciation expense to be recorded by Firm A for the first year of the lease if Firm A uses the straight line depreciation method?

Question 2: Based on the information in the question above regarding the lease by Firm A, what is the amount of ending lease payable at the end of year 1 after the first lease payment?

Reference no: EM132518498

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