Refer to superbyte corporation what amount of depreciation


Problem

SuperByte Corporation Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $12 million. The lease agreement between SuperByte and Laguna Madre had the follow terms:

1. The lease is noncancellable.

2. The lease has no residual value or bargain purchase option.

3. The lease term is 8 years; payments are made semiannually.

4. Depreciation is recorded each December 31 using the straightminus line approach.

5. The economic life of the equipment is 8 years.

6. The lessee's incremental borrowing rate and the implicit interest rate are both 12% annually.

7. The lease payments are $1,493,617 semiannually. The first payment is due at the inception of the lease; subsequent payments are made every July 1 and January 1. 8. The fair value of the equipment at the inception of the lease is $16,000,000. Refer to SuperByte Corporation. What amount of depreciation will Laguna Madre record in its income statement on December 31 of the current year?

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