Question

Pina Corporation entered into an operating lease agreement to lease equipment from Badger, Inc. on January 1, 2017. The lease calls for annual lease payments of $30,000, beginning on January 1, for each of the 3 years of the lease. In addition, Badger will pay Pina $6,000 as a cash incentive for entering the lease by January 1, 2017. In relation to the lease agreement, Pina incurred the following costs.
Salaries of employees involved in the investigation of the lease $3,000
Lease document preparation costs incurred after execution of the lease 500
Pinas incremental borrowing rate is 9%.
Required:
a. If the value of the lease liability is $82 773, what amount wil Pina record as the value of th operating lease?

Answer 1

Answer:

= $80,273

Explanation:

Value of the right of use asset = Value of lease liability - cash incentive received + costs incurred for lease

                  = $82,773 -$ 6,000 + $3,000 + $500

                     =$80,273