On 1/31/Y1, Bailey Company leased a new machine from Sussex Corp. The following data relate...
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Accounting
On 1/31/Y1, Bailey Company leased a new machine from Sussex Corp. The following data relate to the lease transaction at its inception:
| Lease term | 10 years |
| Annual rental payable at beginning of each lease year | $50,000 |
| Useful life of machine | 15 years |
| Implicit interest rate | 10% |
| Present value of an annuity of 1 in advance for 10 periods at 10% | 6.76 |
| Present value of annuity of 1 in arrears for 10 periods at 10% | 6.15 |
| Fair value of the machine | $400,000 |
| Depreciation method | Straight line |
The lease has no renewal option, the possession of the machine reverts to Sussex when the lease terminates, and the machine does have alternative uses. The first lease payment of $50,000 is paid at the inception of the lease. What amount does Sussex Corp. report for depreciation expense in year 1?
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