B is corrent. Income from the lease is the monthly rental plus a proportionate fraction of the lease bonus less any depreciation expense.| Rental income | = | 11 months × $30,000 | = | $ 330,000 | | Lease bonus income | = | $72,000 × 11/36 | = | $ 22,000 | | Depreciation expense | = | $1,440,000/8 years | = | $(180,000) | | Income from leased asset | | | | $ 172,000 |
Note that the lease bonus is recognized as income proportionately over the 36-month lease period. The leased asset is depreciated for a full year since it has an 8-year life from the date of purchase (January 1).A is incorrect. Income from the lease is the monthly rental plus a proportionate fraction of the lease bonus less any depreciation expense.| Rental income | = | 11 months × $30,000 | = | $ 330,000 | | Lease bonus income | = | $72,000 × 11/36 | = | $ 22,000 | | Depreciation expense | = | $1,440,000/8 years | = | $(180,000) | | Income from leased asset | | | | $ 172,000 |
Note that the lease bonus is recognized as income proportionately over the 36-month lease period. The leased asset is depreciated for a full year since it has an 8-year life from the date of purchase (January 1).C is incorrect. Income from the lease is the monthly rental plus a proportionate fraction of the lease bonus less any depreciation expense.| Rental income | = | 11 months × $30,000 | = | $ 330,000 | | Lease bonus income | = | $72,000 × 11/36 | = | $ 22,000 | | Depreciation expense | = | $1,440,000/8 years | = | $(180,000) | | Income from leased asset | | | | $ 172,000 |
Note that the lease bonus is recognized as income proportionately over the 36-month lease period. The leased asset is depreciated for a full year since it has an 8-year life from the date of purchase (January 1).D is incorrect. Income from the lease is the monthly rental plus a proportionate fraction of the lease bonus less any depreciation expense.| Rental income | = | 11 months × $30,000 | = | $ 330,000 | | Lease bonus income | = | $72,000 × 11/36 | = | $ 22,000 | | Depreciation expense | = | $1,440,000/8 years | = | $(180,000) | | Income from leased asset | | | | $ 172,000 |
Note that the lease bonus is recognized as income proportionately over the 36-month lease period. The leased asset is depreciated for a full year since it has an 8-year life from the date of purchase (January 1). |
