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What is the amount that it will record for depreciation

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Question - On January 1, 20X4, Kangaroo Inc. (KI) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow:

Lease payment, including maintenance agreement $85,000

Maintenance agreement included in lease payment $3,000

Implicit rate in the lease (not known) 4%

Incremental borrowing rate 5%

Lease term 6 years

Economic life of equipment 7 years

Guaranteed residual value $20,000

Expected pay-out on residual value guarantee $6,000

Option to purchase No

First annual payment due Commencement date

KI's year-end is December 31. KI elects to adopt the practical expedient available to it and not to separately report the lease and non-lease components in the contract. What is the amount that it will record for depreciation of this right-of-use asset for its year-ended December 31, 20X4?

Reference no: EM132884470

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