Homestead AG entered into a lease to lease equipment from Highlander SA on January 1, 2022. The
Question:
Homestead AG entered into a lease to lease equipment from Highlander SA on January 1, 2022. The lease calls for annual lease payments of €10,000, beginning on December 31, for each of the 5 years of the lease. In addition, Highlander will pay Homestead €2,000 as a cash incentive for entering the lease by December 31. In relation to the lease agreement, Homestead incurred the following costs.
Commissions for selling agents ............................................. € 900
Internal engineering costs ......................................................... 500
Legal fees resulting from the execution of the lease .......... 3,000
Homestead’s incremental borrowing rate is 6%. If the value of the lease liability is €44,651, what amount will Homestead record as the value of the right-of-use asset on January 1, 2022, at commencement of the operating lease?
Step by Step Answer:
Intermediate Accounting IFRS
ISBN: 9781119607519
4th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield