Paula Ltd manufactures specialised machinery for both sale and lease. On $1$ July $2019,$ Paula Ltd leased one of these machines to Teddy Ltd$,$ incurring $$1,200$ In costs to

prepare and execute the lease document.

Teddy Ltd incurred $$654$ in costs to negotiate the agreement.

The machine being leased cost Paula Ltd $$40000$ to manufacture. The machine is expected to have an economic life of $6$ years, after which time it will have a residual

value of $$950.$ The lease agreement details are as follows.

Length of lease: $4$ years

Commencement date: $1$ July $2019$

Annual lease payment, payable $30$ June each year commencing $30$ June $2020$: $$15253$

Residual value at the end of the lease term, fully guaranteed by Teddy Ltd: $$7454$

Interest rate implicit in the lease: $7\%$

All insurance and maintenance costs are paid by Paula Ltd and amount to $$2030$ per year and will be reimbursed by Teddy Ltd by being included in the annual lease

payment of $$15253.$ The machinery will be depreciated on a straight$-$line basis.

It is expected that Teddy Ltd will purchase the machine from Paula Ltd at the end of the lease.

What was the value of the right$-$of$-$use asset at the inception of the lease on $1$ July $2019?$

PLEASE ENTER YOUR ANSWER IN WHOLE NUMBERS WITH NO COMMAS OR DOLLAR SIGNS $($EG $$1,000,000$ SHOULD BE SHOWN AS $1000000$;$-$$$1,000,000$

SHOULD BE SHOWN AS $-1000000).$

Answer:Paula Ltd manufactures specialised machinery for both sale and lease. On $1$ July $2019,$ Paula Ltd leased one of these machines to Teddy Ltd$,$ incurring $$1,200$ in COStS tO prepare and execute the lease document.

Teddy Ltd incurred $$654$ in costs to negotiate the agreement.

The machine being leased cost Paula Ltd $$40000$ to manufacture. The machine is expected to have an economic life of $6$ years, after which time it will have a residual value of $$950.$ The lease agreement details are as follows.

$*$ Length of lease: $4$ years

$*$ Commencement date: $1$ July $2019$

$*$ Annual lease payment, payable $30$ June each year commencing $30$ June $2020$: $$15253$

$*$ Residual value at the end of the lease term, fully guaranteed by Teddy Ltd: $$7454$

$*$ Interest rate implicit in the lease: $7\%$

All insurance and maintenance costs are paid by Paula Ltd and amount to $$2030$ per year and will be reimbursed by Teddy Ltd by being included in the annual lease payment of $$15253.$ The machinery will be depreciated on a straight$-$line basis.

It is expected that Teddy Ltd will purchase the machine from Paula Ltd at the end of the lease.

What was the value of the right$-$of$-$use asset at the inception of the lease on $1$ July $2019?$