On January 1, 2004, Digital, Inc. leased heavy machinery from Young Leasing Company. The terms of the lease require annual payments of $20,000 for twenty years beginning on December 31, 2004. The interest rate on the lease is 10%. Assume the lease qualifies as a capital lease.
Calculate the amount of depreciation expense recorded by Digital, Inc. in 2006 related to the leased asset. Assume Digital, Inc. uses the double-declining balance depreciation method. Enter your answer with two places after the decimal point (i.e., $123,456.78).
You will need to use the time value of money factors posted in carmen to answer this question.