XYZ Company Leased Equipment to West Corporation Under a Lease

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 seven years. The lease term is five years. Using the straight-line method, what would West record as annual amortization?

A) $120,000.
B) $61,000.
C) $60,000.
D) $0.