What is the initial cost of the right of use asset

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At the beginning of the current year, Thamoz Company leased an equipment from a lessor with the following pertinent information:

Annual rental payable at the end of each year 500, 000
Lease term 8 years
Useful life of equipment 10 years
Implicit Interest Rate 10%
PV of an ordinary annuity of 1 for 8 periods at 10% 5.33
Present value of 1 for 8 periods at 10% 0.47

The entity has the option to purchase the equipment on the expiration of the lease term by paying PHP 500,000. There is a reasonable certainty that the entity shall exercise the option. The entity incurred initial direct cost of PHP 200,000.

Problem 1: What is the initial cost of the right of use asset?

Reference no: EM132829244

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