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What is the cost of the right-of-use asset

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Question - On January 1, 2022, Tiktok Company leased a heavy equipment to he used in its construction business. The following information relates to the lease:

Lease term - 10 years

Useful life of the equipment - 12 years

Annual rental payable in advance every January - P240,000

Implicit interest rate - 14%

Incremental borrowing rate - 12%

Tiktok has the option to purchase the leased asset by paying P4130300, which approximates the fair value of the equipment on the option exercise date. What is the cost of the right-of-use asset?

Reference no: EM133188166

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