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XYZ Company leased equipment to West Corporation under a lease agreement that qualifies as a finance lease to West but not as a result of a bargain purchase option or a title transfer. The present value
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21 votes
21 votes
XYZ Company leased equipment to West Corporation under a lease agreement that qualifies as a finance lease to West but not as a result of a bargain purchase option or a title transfer. The present value of the lease payments is $600,000. The expected economic life of the asset is ten years. The lease term is eight years. Using the straight-line method, what would West record as annual amortization

User Nluigi
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1 Answer

24 votes
24 votes

Answer:

$60,000

Step-by-step explanation:

Calculation to determine what would West record as annual amortization

Using this formula

Annual amortization =Present value of the lease payments /Expected economic life of the asset

Let plug in the formula

Annual amortization = ($600,000 x 1/10 years).

Annual amortization =$60,000

Therefore what West record as annual amortization is $60,000

User Zaxme
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