Table 15-5
On January 2, 2017, Goldman Corporation signed an eight-year capital lease on an office building requiring annual lease payments of $7,500, with the first payment due immediately. Annual lease payments are made each December 31. The present value of the seven future lease payments at 10% interest per year is $36,510.
-Refer to Table 15-5.The entry on December 31,2017,to record amortization on the leased asset using straight-line amortization would include a:

Question

Quizplus · Accepted Answer

The correct answer involves calculating the total cost of the lease and then dividing by the lease term to find the annual amortization expense. The total cost includes the immediate payment of $7,500 plus the present value of future payments ($36,510), totaling $44,010. Over an eight-year term, this results in an annual amortization expense of $5,501.25, which is rounded to $5,501. This amount is credited to Accumulated Amortization-Office Building to reflect the expense.

Table 15-5 On January 2, 2017, Goldman Corporation Signed an Eight-Year Capital