What is the initial cost of the right of use asset

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Question - 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.

Required - What is the initial cost of the right of use asset?

Reference no: EM132899666

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