On January 1, year 1, LaGuardia Company signed a five-year non-cancellable lease for a new machine with

Question:

On January 1, year 1, LaGuardia Company signed a five-year non-cancellable lease for a new machine with a fair value of $ 80,000, requiring $ 8,000 annual payments at the beginning of each year. The machine had a useful life of 10 years, with no . Title did not pass to LaGuardia, nor was there any bargain purchase option. LaGuardia uses straight-line depreciation for all of its plant assets. Aggregate lease payments had a present value on January 1, 20X1 of $ 40,000 based on an appropriate interest rate. For Year 1, LaGuardia should record depreciation (amortization) expense for the leased machine under U. S. at:
a. $ 0
b. $ 7,500
c. $ 6,000
d. $ 8,000
GAAP
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