Homestead Corporation entered into an operating lease to lease equipment from Highlander, Inc. on January 1, 2020.

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Homestead Corporation entered into an operating lease to lease equipment from Highlander, Inc. on January 1, 2020. 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, Inc. will pay Homestead Corporation $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, 2020, at commencement of the operating lease?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-1119503668

17th edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel

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