Lisa, Inc. leased equipment from Gower Company under a four-year lease requiring equal annual payments of $344,152,

Fantastic news! We've Found the answer you've been seeking!

Question:

Lisa, Inc. leased equipment from Gower Company under a four-year lease requiring equal annual payments of $344,152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Lisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Lisa, Inc.) is 8%. Lisa, Inc. uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Lisa, Inc. in the first year of the asset’s life?

PV Annuity Due PV Ordinary Annuity

8%, 4 periods 3.57710 3.31213

10%, 4 periods 3.48685 3.16986