Question
Flower Company purchased a machine for leasing purposes on January 1, 2020, for $1,000,000. On March 1, 2020, Flower leased the machine to Dow Company
Flower Company purchased a machine for leasing purposes on January 1, 2020, for $1,000,000. On March 1, 2020, Flower leased the machine to Dow Company for $140,000 a year for a five-year period ending December 31, 2024, at which time, the machine reverts to Flower. Dow Company estimates the machines useful life to be 10 years. Dow does not guarantee a residual value of the machine at lease-end. Dow paid $140,000 to Flower on March 1, 2020, the first annual lease payment. Dow is not aware of the implicit rate of the lease, but Dow's incremental borrowing rate is 5%.What was the Right-of-Use Asset value in 2020 for Dow Company at commencement?
A. | $636,433 | |
B. | $681,893 | |
C. | $558,487 | |
D. | None of the above |
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