Question
Homestead Corporation entered into an operating lease to lease equipment from Highlander, Inc. on January 1, 2017. The lease calls for annual lease payments of
Homestead Corporation entered into an operating lease to lease equipment from Highlander, Inc. on January 1, 2017. 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 Internal engineering costs Legal fees resulting from the execution of the lease
$ 900 500 3,000
Homesteads 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, 2017, at commencement of the operating lease?
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