Refer to the following lease amortization schedule. The five payments
are made annually starting with the beginning of the lease. A $2,500
purchase option is reasonably certain to be exercised at the end of the
five-year lease. The asset has an expected economic life of eight years.
Lease
Payment
Effective Decrease in Outstanding
Cash
Payment
Interest
Balance
Balance
$ 43,900
1
$ 9,600
??
??
34,300
2
9,600
$ 2,401
$ 7,199
27,101
3
9,600
1,897
7,703
19,398
4
9,600
1,358
8,242
11,156
5
9,600
??
??
??
6
$ 2,500
$ 164
$ 2,336
$ 0
What amount would the lessee record as annual amortization on the
asset using the straight-line method, assuming no residual value?
Note: Round your answer to the nearest whole dollar.
Multiple Choice
$8,780