Question - Twohig Company leased a piece of equipment from Wells, Corp. on January 1, 2011 for $300,000. The lease term is for seven years and the life of the asset is 10 years. The lease also contains a $10,000 bargain purchase option, which Twohig is expected to exercise at the end of the lease period. Assuming that the salvage value of the equipment is $20,000, what amount of depreciation expense would Twohig recognize each year?
$0
$28,000
$29,000
$40,000
$41,428.57