On January 1 of this year, Google Corporation leased a package of high-speed servers by signing a five-year finance lease. Lease payments of $300,000 are due at the end of each year. Google uses the straight-line method to amortize leased assets and the effective interest rate method to amortize lease liabilities. Assume that the appropriate annual discount rate is 9 percent.

AMORTIZATION SCHEDULE FOR LEASED SERVERS Year Book value of lease asset on Jan. 1 Amortization expense recorded on Dec. 31 Book value of lease liability on Jan. 1 Reduction of lease liability recorded on Dec. 31 Interest expense recorded on Dec. 31 Cash paid 1 Dec Year 1 1,166,895.38 Year 2 Year 3 Year 4 Year 5