For the Following Lease, Determine the Amount the ROU Asset

question 18

Multiple Choice

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

• A)86,502
• B)91,243
• C)95,816
• D)101,451

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Definitions:

Credit Terms

The agreements between buyers and sellers that stipulate payment amounts and due dates, often including discounts for early payment or penalties for late payment.

Net 30

A payment term indicating that the full payment is due within 30 days of the invoice date.

Economic Order Quantity

A formula used in inventory management to determine the optimal order size that minimizes the total holding costs and ordering costs.