For the Following Lease, Determine the Amount the ROU Asset

question 22

Multiple Choice

For the following lease, determine the amount the ROU asset will be initially measured at.
$\begin{array}{|l|l|}\hline \begin{array}{l}\text { Annual payment (due at end of } \\\text { year) }\end{array} & \$ 25,000 \\\hline \text { Lease term } & 5 \\\hline \text { Incremental borrowing rate } & 7 \% \\\hline \begin{array}{l}\text { Implicit rate (readily } \\\text { determinable by lessee) }\end{array} & 6 \% \\\hline \begin{array}{l}\text { Non-lease costs included in } \\\text { annual payment }\end{array} & 2,000 \\\hline\end{array}$

• A)94,305
• B)96,884
• C)102,505
• D)105,309

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Definitions:

Accounting Profits

Net income reported on a company's financial statements, calculated as total revenues minus explicit costs, excluding opportunity costs.

Economic Profits

The surplus remaining after total costs are subtracted from total revenues, taking into account both explicit and implicit costs.

Accounting Profits

The difference between total revenue and explicit costs; the net income a firm reports on its income statement.

Total Costs

The aggregate of all expenses associated with manufacturing products or services, which includes fixed and variable costs.