Reference no: EM133138934

Questions -

Q1. Mimi, Inc. leased an equipment from Lessor Company with the following information:

Present value of annual rental: 3,170,000

Present value of guaranteed residual value: 340,000

Initial direct costs paid by the lessee: 300,000

Present value of estimated cost of dismantling of the asset: 390,000

How much is the cost of the right-of-use asset to be recognized by Mimi, Inc.?

Q2. Entity A (customer) enters into a contract with Entity B (supplier) for the use of a data processing equipment. According to the contract, Entity A shall operate the equipment only in accordance with the standard operating procedures stated in the accompanying user's manual. In assessing the existence of a lease, does Entity A have the right to direct the use of the asset?

a. No, because the asset's use is restricted.

b. Yes, because Entity A has the right to direct how and for what purpose the asset is used.

c. Yes, because the asset's use is predetermined and Entity B is precluded from changing that predetermined use.

d. Maybe yes, maybe no, but exactly I don't know.