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:

Carbon Cycle

The biogeochemical cycle through which carbon is exchanged among the biosphere, pedosphere, geosphere, hydrosphere, and atmosphere of the Earth.

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration. It is naturally present in air and is absorbed by plants in photosynthesis.

Terrestrial Plants

Terrestrial plants are species that grow on land rather than in water, adapting to a variety of habitats from forests to deserts.

Aquifer

Rock layers that contain water and release it in appreciable quantities to wells or springs.