For the Following Lease, Determine the Amount the ROU Asset

question 32

Multiple Choice

For the following lease, determine the amount the ROU asset will be initially measured at.
$\begin{array}{|l|l|}\hline \begin{array}{l}\text { Annual payment (due at commencement date of } \\\text { lease) }\end{array} & \$ 23,000 \\\hline \text { Lease term } & 5 \\\hline \text { Incremental borrowing rate } & 10 \% \\\hline \text { Implicit rate (readily determinable by lessee) } & 8 \% \\\hline \text { Unguaranteed residual value } & \text { NA } \\\hline \text { Guaranteed residual value } & 20,000 \\\hline \text { Expected payout under guarantee } & 14,000 \\\hline\end{array}$

• A)93,792
• B)103,792
• C)107,794
• D)108,759

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Definitions:

Variance

A statistical measurement of the dispersion between numbers in a data set, measuring how far each number in the set is from the mean.

Volatility

Measures the degree of variation of a trading price series over time, indicating the level of uncertainty or risk associated with the size of changes in a security's value.

Unsystematic Risk

The risk associated with a specific issuer of a security or investment, which can be mitigated through diversification.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize the impact of any single investment's performance.