On January 1, 2018, Blue Co. leased a new machine from Green Co. The following i

Question

On January 1, 2018, Blue Co. leased a new machine from Green Co. The following information pertains to the lease Lease term Annual rental payable at beginning of each year Useful life of machine Blue's incremental borrowing rate Implicit interest rate in lease (known by Blue) Present value of annuity of $1 in advance for 5 periods at 5 years $55,90e 7 years 12% 10% 4.17 4.04 12% The cost of the machine on Green's accounting records is $214,500. It is customized for Blue's use with no alternative use to Green at the end of the lease term. At the beginning of the lease term, Blue Co. should initially record a right-of-use asset of Multiple Choice $222,200 $214,500 $174,350 $229,350

Explanation / Answer

Value to be recorded in begining is present value of the annual lease payments. Rate for discounting is Implict rate so accordingly amount to be recorded is 55000*4.17= 229350$

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