1. On July 1, 2019, Astin Company leased equipment from Yankee Inc. The lease calls for five equal annual payments of $500,000, beginning July 1, 2020. The useful life of the equipment was six years. The implicit rate was 11%.

   The equipment would be recorded at:

   		$2,225,000.
   		$2,500,000.
   		$2,051,225.
   		$1,847,950.

2. On January 1, 2019 Frankstein Company (lessee) entered into a 5-year lease for a piece of equipment. Frankstein accounted for the acquisition as a finance lease for $120,000 (present value of lease payments). This lease includes a $5,000 bargain purchase option. At the end of the lease, Frankstein expects to exercise the bargain purchase option. Frankstein estimates that the equipment's fair value will be $10,000 at the end of its 8-year life. Frankstein regularly uses straight-line depreciation on similar equipment.

For the year ended December 31, 2019, what amount should Frankstein recognize as amortization of the asset recorded under the capital lease?

		$23,000.
		$13,750.
		$15,000.
		$24,000.