For the Following Lease, Determine the Amount the ROU Asset

question 23

Multiple Choice

For the following lease, determine the amount the ROU asset will be initially measured at.
$\begin{array}{|l|l|}\hline \begin{array}{l}\text { Annual payment (due on commencement date } \\\text { of lease) }\end{array} & \$ 30,000 \\\hline \text { Lease term } & 5 \\\hline \text { Incremental borrowing rate } & 10 \% \\\hline \text { Implicit rate (not readily determinable by lessee) } & 8 \% \\\hline \text { Guaranteed residual value } & 28,000 \\\hline \text { Expected payout under guarantee } & 15,000 \\\hline\end{array}$

• A)123,037
• B)134,410
• C)139,573
• D)142,482

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales, such as materials and labor.

Corporate Tax Rate

The percentage of a corporation's profits that is paid to the government as tax.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Variable Costs

Costs that vary directly with the level of production or the volume of services provided.