Compute the annual depreciation for toys manufactured

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Reference no: EM131256239

Toys Manufacturer leased an asset for use in its factory in Athens, Georgia from Robotic Corporation. The lease agreement stipulates that Toys Manufactured is required to make annual payments of $2,818 payable on the last day of the calendar year (December 31 each year). Robotic Corporation classified the lease as a direct-financing lease since Toys Manufacturer was permitted to lease the asset at its cost of $28,000 which is the present value of the minimum lease payments. Robotic Corporation receives a 10% rate of return on the lease. The estimated salvage value at the end of the lease term is zero.

Requirement:

Compute the annual depreciation for Toys Manufactured if the lease is classified as a capital lease by the lessee. The lessee depreciates similar assets utilizing straight-line depreciation. Round all calculations to the nearest dollar. You are also required to utilize the time value tables from the textbook. Do not compute the answers with a financial calculator as if your computations are not within +/- $2 of my solution then you will not receive any credit.

The topic is Accounting for Leases.

Reference no: EM131256239

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