For the Following Lease, Determine the Amount the ROU Asset

question 20

Multiple Choice

For the following lease, determine the amount the ROU asset will be initially measured at.
$\begin{array}{|l|l|}\hline \text { Annual payment (due at end of year) } & \$ 22,000 \\\hline \text { Lease term } & 5 \\\hline \text { Incremental borrowing rate } & 10 \% \\\hline \text { Implicit rate (not readily determinable by lessee) } & 8 \% \\\hline \text { Unguaranteed residual value } & 15,000 \\\hline\end{array}$

• A)83,397
• B)92,711
• C)98,048
• D)102,304

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Definitions:

Equity Method

An accounting technique used when a company invests in another company and exercises significant influence over it, adjusting the value of the investment based on the investee's performance.

Cash Dividend

The disbursement of cash from a company's earnings to its shareholders, a decision made by the board of directors for a specific class of its investors.

Voting Common Stock

A class of stock that grants the shareholder voting rights in a corporation's decisions, typically one vote per share owned.

Market Price

The present rate at which a product or service can be purchased or sold.