Question

Warren Co. recorded a right-of-use asset of $780,000 in a 10-year finance lease. The interest rate charged by the lessor was 10%. The balance in the right-of-use asset after 2 years will be:

Answer 1

Answer: $624000

Explanation:

From the question, we are informed that Warren Co. recorded a right-of-use asset of $780,000 in a 10-year finance lease and that the interest rate charged by the lessor was 10%.

The balance in the right-of-use asset after 2 years will be calculated as:

= $780,000 - [($780,000/10) × 2]

= $780,000 - ($78000 × 2)

= $780,000 - $156,000

= $624000