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What is the cost of the right of use asset

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Question - On January 1, 2021, Wait Company leased equipment from a lessor with the following information:

Annual rental payable every December 31: 2,000,000

Residual value guarantee: 1,000,000

Initial direct cost: 600,000

Estimated dismantling and restoration cost required by contract at present value: 780,000

Annual executory cost paid by the entity: 100,000

The lease term is four years while the equipment's useful life is 8 years. The implicit rate in the lease, known by the entity, is 10%.

The present value of an ordinary annuity of 1 at 10% for 4 periods is: 3.17

The present value of 1 at 10% for 4 periods is: 0.68

1. What is the initial lease liability?

2. What is the cost of the right of use asset?

Reference no: EM133087654

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