On January 1, 2021, Jasperse Corporation leased equipment under a finance lease designed to earn the lessor a 10% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $90,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $8,000 per year. Insurance premiums of $7,000 annually are related to the equipment. Both amounts were to be paid by the lessor and lease payments reflect both expenditures. Required:
At what amount will Jasperse record a right-of-use asset?

$554,320

Explanation:

Annual payment = $90,000

Rate = 10%

Time period = 10 years

Maintenance of equipment = $8,000

PVAD of $1(n = 10, i=11) = 6.76

Lease payment = $90,000 - $8,000 = $82,000

Amount of Right-of-use asset = Lease payment * PVAD of $1

Amount of Right-of-use asset = $82,000 * 6.76

Amount of Right-of-use asset = $554,320

So, Jasperse will record $554,320 as a right-of-use asset amount.

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