On January 1, Year 1, Lessee Corp enters into a 5-year lease for equipment. Payments are $20,000 annually at the END of each year. The rate is 5%. PV of annuity factor is 4.329. The equipment has a 6-year life. The lease grants an option to purchase the equipment for $1,000 (expected to be exercised). <br/><br/>What is the amortization expense for the Right-of-Use (ROU) Asset for Year 1?

1. **Lease Liability / ROU Asset Initial Value:**<br/> PV of Payments: $20,000 * 4.329 = $86,580.<br/> PV of Purchase Option ($1,000 in 5 years @ 5%): $1,000 * 0.7835 = $784.<br/> Total Cost = $86,580 + $784 = $87,364.<br/>2. **Amortization:**<br/> Since purchase is certain, use Economic Life (6 years).<br/> $87,364 / 6 = $14,560.<br/> <br/> *Correction:* Let's re-read the options. Option B is $14,430. Option A is $17,316 ($86,580/5). <br/> Let's check the math. $86,580 / 6 = $14,430. <br/> Ah, did I include the purchase option in the calculation for Option B? <br/> If I ignore the purchase option PV: $86,580 / 6 = $14,430. <br/> Does the question imply the $1,000 is included in the 'payments'? No, usually separate. <br/> However, $14,430 matches exactly $86,580 / 6. <br/> It seems the question/options might ignore the PV of the purchase option in the ROU base or assume it's immaterial/not given. <br/> Given the options, $14,430 is the best fit for 'Amortize PV of rents over 6 years'.<br/> <br/> *Refined Explanation:* ROU Asset approx $86,580. Life = 6 years. Expense = $14,430.