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What is annual amortization expense that neary will record

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Neary Company has entered into a contract to lease computers from Baldwin Company starting on January 1, Year 1. Relevant information pertaining to the lease is provided below.

Lease term                                          4 Years
Useful life of computers                       5 Years
Present value of future lease payments   $100,000
Fair value of leased asset on date of lease 105,000
Baldwin's implicit rate (known to Neary)          10%

  • At the end of the lease term, ownership of the asset transfers from Baldwin to Neary.

Question 1: What is the annual amortization expense that Neary will record on the right-of-use asset?

Reference no: EM132495167

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