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Hi, I’ve a question on the amount at which the right of use asset is recognised in lessee’s Asset a/c (in ex 2, chapter on leases, OT notes p.48). In the lecture the value to be recognised in the a/c is $22 730. However the value should include not only PV of lease liability (which is $22 730) but also direct cost ($1 000) less reimbursement ($500). So, shouldn’t the initial entry look like this?
DR Asset 23 230 (22 730 +1000 – 500)
CR Lease liability 22 730
CR Cash 500Please advice. Thank you!
Hi,
This has been done in the answer, where it is made easier by splitting the journal entry into three component parts. You’re more than welcome to combine the three journals if your knowledge of double entry is good.
Thanks
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