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Calculate the present value of the right of use assets

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Reference no: EM132911686

Problem - Lease B

The fair value of the equipment is $700,000 at the inception of the lease.

The lease term is five years.

Annual lease payments are $145,000 per year. Payments are due at the beginning of each lease year.

The lessee is offered a purchase option for the asset for $18,000 at the end of the lease term which is expected to be exercised.

The lease payments include the cost of insurance, estimated at $12,000 per year.

The lessor's implicit rate of interest in the lease is 6% is known to the lessee. The lessee's incremental borrowing rate is 8%.

Required - Calculate the present value of the right of use assets for each lease.

Reference no: EM132911686

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