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What amount should raphael recognize as depreciation expense

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Question 1. On January 2, 2015, Raphael Mining Company (lessee) entered into a 5-year lease for drilling equipment. Raphael accounted for the acquisitions as a finance lease for P2, 400,000, which includes a P100, 000 bargain purchase option. At the end of the lease, Raphael expects to exercise the bargain purchase option. Raphael estimates that the equipment's fair value will be P200, 000 at the end of its 8-year life. Raphael regularly uses straight-line depreciation on similar equipment.

For the year ended December 31, 2015, what amount should Raphael recognize as depreciation expense on the leased asset?

a. P 480,000

b. P 460,000

c. P 300,000

d. P 275,000

Reference no: EM132575857

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