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How much is the lease liability to be recognized

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Question - On January 1, 2021, Entity X enters into a 3-year lease of equipment for an annual rent of 100,000 payable at the end of each year. The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. Entity X uses the straight-line method of depreciation. The relevant present value factors are as follows:

PV of an ordinary annuity of ?1 @10%, n=3 2.48685

PV of an ordinary annuity of ?1 @12%, n=3 2.40183

Required - How much is the lease liability to be recognized by Entity X on initial recognition?

Reference no: EM132918027

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