Information has been gathered on the following lease:

The fair value of the equipment is $600,000 at the beginning of the lease.

The lease term is 5 years.

Annual lease payments are $125,000, and payments are due at the beginning of each lease year.

The lease contains a purchase option for the asset of $16,000 at the end of the lease term which is expected to be exercised.

The lessor's implicit rate of interest in the lease is 6%; the lessee's incremental borrowing rate is 8%.

Required:

Assuming the lessee follows IFRS, calculate the value of the right-of-use asset for the lease and prepare the initial journal entry for the lessee. Round amounts to the nearest dollar.