Question：Vee acquires a machine subject to a finance lease during 20X1. The machine has a fair value of $220,000 and an expected useful life of 11 years. The primary leasing term is 8 years. Other plant and machinery owned by Vee plc is depreciated over 12 years. Vee charges a full year's depreciation in the year of acquisition but none in the year of disposal.
　　What is the 20X1 depreciation charge to the nearest dollar?
　　A. $27,500.
　　B. $18,333.
　　C. Nil, the asset is not owned by Vee so only the finance charge needs to appear in the income statement.
　　D. $20,000.
　　The correct answer is: $27,500.
　　Finance leased assets are depreciated over the shorter of the lease term and the useful life of the asset. The lease term of 8 years must be used here because it is shorter than the useful life of the asset.