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Calculate the amount of the right-of-use asset

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Question - Lee Ltd. recently signed a lease for equipment from Photon Inc. The lease term is five years and requires equal rental payments of $32,000 at the beginning of each year. The equipment has a fair value at the lease's inception of $140,000, an estimated useful life of eight years, and no residual value. Lee pays all executory costs directly to third parties. Photon set the annual rental to earn a rate of return of 8%, and this fact is known to Lee. The lease does not transfer title or contain a BPO.

Required -

a) Calculate the amount of the right-of-use asset and lease liability. Round all numbers to the nearest cent.

b) Discuss the nature of the lease to the lessee.

Reference no: EM132885180

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