Hey guys,
My question concerns the first vignette of the Practice Problems of Reading 20. Basically, in questions 1 through 4 we’re asked to capitalize an operating lease, and I’m wondering about some inconsistencies in the solutions.
I’m clear about how we capitalize a lease, the math is straightforward. In the income statement i have to account for interest expense as well as for depreciation expense (question 2). However, when it comes to the assets, the solution doesn’t account for depreciation during the first year (questions 1, 3 and 4). Not even partial depreciation as we are looking at average total assets.
I would depreciate the asset in accordance with the depreciation expense already recorded in the income statement.
What am I missing?