Reference no: EM133167210

Question - On 1 July 20X1 Low Ltd acquired some equipment at fair value. On the same day, Low Ltd leased the equipment to High Ltd. Low Ltd determined that the lease was a finance lease.

The details of the lease arrangement are as follows:

The lease term was 8 years and the interest rate implicit in the arrangement was 9%

The lessee agreed to pay an amount of $34,000 to the lessor on the 30 June each year, with the first payment to be made on 30 June 20X2.

Included in the annual payment made by High Ltd to Low Ltd was an amount of $1,000 for repairs and maintenance. Low Ltd arranged for those services to be provided by external contractors. 

The residual value at the end of the lease term was $22,000 and of this, an amount of $17,000 was guaranteed by the lessee $3,000 is the amount of the residual value guarantee that was expected to be payable by the lessee to the lessor at the end of the lease term

The lessee paid initial direct costs of $1,897 and the lessor paid initial direct costs of $1,663 at the commencement of the lease

The lease arrangement is non-cancellable

At the end of the lease term, the equipment will be returned to the lessor.

Required - Write the amount that would be recognised by High Ltd in accordance with the requirements of AASB 16: Leases as the Right-of-Use Asset for the above lease arrangement. Do not include any spaces or dollar signs in your answer.