Use the Following Information for Questions

question 60

Multiple Choice

Use the following information for questions.
On January 2, 2017, Cambridge Ltd.signed a ten-year non-cancellable lease for a heavy-duty drill press.The lease required annual payments of $35,000, starting December 31, 2017, with title passing to Cambridge at the end of the lease.Cambridge is accounting for this lease as a capital (finance) lease.The drill press has an estimated useful life of 20 years, with no residual value.Cambridge uses straight-line depreciation for all its plant assets.The lease payments were determined to have a present value of $215,000, based on an implicit interest rate of 10%.
-On their 2017 income statement, how much depreciation expense should Cambridge report in connection with this lease?

• A)$10,750
• B)$17,500
• C)$21,500
• D)$35,000

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Definitions:

Enterprise

An organization or business venture, particularly one that is large, complex, or involves substantial resources.

IT

Information Technology, referring to the use of computers, software, and networks for the processing and distribution of data.

ERP Systems

Enterprise Resource Planning systems integrate various functions across an organization into a unified database to streamline processes and information across the organization.

TPSs

Transaction Processing Systems, computerized systems that perform and record the daily routine transactions necessary to the operation of a business.