that provides RDC with the right-of-use of a vehicle for one year at which time

Question

that provides RDC with the right-of-use of a vehicle for one year at which time the asset is returned to the lessor. The fair Ron's Data Corp. (RDC) entered into a value of the car is $40,000. Terms of the ntract require ROC to make payments of $1,000 per month with the first payment due on March 31, 2018, the commencement date of the lease. RDC knows that the implicit rate in the lease is 0.5% per month. Assume that ROC does not elect to expense leases of a short-term nature the cost of the right-of-use asset at the commencement date of the lease

Explanation / Answer

The cost of the right of use asset at the commencement date = $1000*12 - ($12000 * 0.5%) = $11940 (lease liability maintained)

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