Windy Company enters into a lease arrangement with Highwing Leasing for 5 years. Windy agrees to pay 4% of its net sales as a variable lease payment. Windy does not pay any fixed payments. Windy is a highly successful company that has achieved over $1,400,000 in net sales over the last 7 years. Both Windy and Highwing forecast that net sales will be a much greater amount than $1,400,000 in subsequent years. As a result, it is highly certain that Windy will make payments of at least $56,000 ($1,400,000 4%) each year.

What is the lease payment amount Windy should use to record its right-of-use asset?

Lease payment