Q9 Determining Amounts in Operating Lease

Kulvers Inc. leases equipment from Equip Inc. on January 1 under a 3-year operating lease. Kulvers agrees to pay Equip Inc. $13,500 annually with the first payment due on January 1. As an incentive for Kulvers to sign the lease by January 1, Equip Inc. paid Kulvers Inc. $630. Kulvers also incurred legal fees for the review of the lease agreement ($180) and salaries for employees involved in negotiating the lease ($1,170). Assuming an incremental borrowing rate of 7% for Kulvers Inc., determine the value of the lease liability and the right-of-use asset on January 1 for Kulvers.

Determining Amounts in Operating Lease Kulver's Inc. leases equipment from Equip Inc. on January 1 under a 3-year operating lease. Kulver's agrees to pay Equip Inc. $13,500 annually with the first payment due on January 1. As an incentive for Kulver's to sign the lease by January 1, Equip Inc. paid Kulver's Inc. $630. Kulver's also incurred legal fees for the review of the lease agreement (\$180) and salaries for employees involved in negotiating the lease ($1,170). Assuming an incremental borrowing rate of 7% for Kulver's Inc., determine the value of the lease liability and the right-of-use asset on January 1 for Kulver's. Note: Round your answers to the nearest whole dollar