Chart 1(a): Calculation of Gross and Adjusted Capitalized Costs
Calculation of gross capitalized cost:

Agreed-upon value of vehicle: $20,000

+Amortized amounts:
Service contract: $ 750
Outstanding lease balance: +1,250
Total amortized amounts: $ 2,000     + 2,000

= Gross capitalized cost: $22,000

Calculation of adjusted capitalized cost:

Gross capitalized cost: $22,000
- Capitalized cost reduction : - 1,000
= Adjusted capitalized cost: $21,000