Create a lease amortization schedule such as the one shown here…
The lease amortization schedule is comparable to a loan amortization schedule. The first payment (excluding any tax levied on the payment) is deducted from the adjusted capitalized cost in its entirety because it is paid upfront. This should make sense.
It’s important to recognize that the lease payment used to amortize the lease is the base payment and, therefore, excludes any tax levied on the payment streams. The lease is amortized at the interest rate implicit in the lease which is the internal rate of return (IRR). Questions? Let me know.