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An initial payment is made on 1 April 20X7 and the present value of the future lease payments at that date is $173,500 Payments in respect of the lease are made in advance and are $100,000 per annum, commencing on 1 April 20X8. The rate of interest implicit in the lease is 10%. The lease does not transfer ownership of the plant to Fino Co by the end of the lease term and there is no purchase option available.
Fino Co incurred initial direct costs of $20,000 to set up the lease and received lease incentives from the
manufacturer totalling $7,000.
What is the initial cost of the right-of-use asset as at 1 April 20X7?Could you please help me with this question. The answer is 286500 but I’m not getting how! Shouldn’t it be 173500+20000-7000=176500?
initial payment or payment made at commencement of lease should be added to PV of future lease payment . so , 173500+100000+20000-7000= 268500
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