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What amount should nori recognize as amortization expense

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Question

On January 2, 2018, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment. Nori accounted for the acquisition as a finance lease for $205,000, which includes a $39,100 purchase option.

At the end of the lease, Nori is reasonably certain to exercise the purchase option. Nori estimates that the equipment's fair value will be $49,900 at the end of its 8-year life. Nori regularly uses straight-line depreciation on similar equipment.

For the year ended December 31, 2018, what amount should Nori recognize as amortization expense on the leased asset?

Reference no: EM132345537

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