Question: On January 2, 2010, Lem Corp. bought machinery under a contract that required a down payment of $10,000, plus twenty-four monthly payments of $5,000 each,

On January 2, 2010, Lem Corp. bought machinery under a contract that required a down payment of $10,000, plus twenty-four monthly payments of $5,000 each, for total cash payments of $130,000. The cash equivalent price of the machinery was $110,000. The machinery has an estimated useful life of ten years and estimated salvage value of

$5,000. Lem uses straight-line depreciation. In its 2010 income statement, what amount should Lem report as depreciation for this machinery?

a. $10,500

b. $11,000

c. $12,500

d. $13,000

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