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What is the total amount recorded

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Question - On January 1, 2019, Lessee Co. entered into a 10-year agreement with Lessor Co. to use equipment in typical use and with a useful life of 12 years. The lease requires yearly payments in advance on January 1 of each year for $71,800. . The FMV of the asset on open market on January 1 is $595,000. The asset cost $510,000 on January 1, 2019 to the Lessor. The agreement was structured by a lease broker, who charged Lessee Co. $1,800 to write the lease, with payment due on January 1, 2019. Lessee Co. has analyzed the service or lease implications and determined that this is a lease arrangement for accounting purposes.

The FMV of the asset is $45,000 at the end of the lease, and the Lessee is able to purchase the asset for $17,000 at the end of the lease agreement, substantially below market value.

The rate implicit in the lease is 5%, the lessee's incremental borrowing rate is 6%, and the lessee is aware of the lease rate. Both companies use straight line depreciation for assets and a calendar year for year-end.

What is the total amount recorded for the Right-of-Use asset through January 1 journal entries?

Reference no: EM133145340

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