Question: Niko Ltd. signed a lease for a five-year term that requires yearly, beginning-of-year payments of $104,000 including maintenance. Based on allocating the lease payment on

Niko Ltd. signed a lease for a five-year term that requires yearly, beginning-of-year payments of $104,000 including maintenance.
Based on allocating the lease payment on relative stand-alone prices, the lease component is $94,400 and the non-lease component for maintenance is $9,600. Niko has a residual guaranteed value of $26,500 at the end of the lease term. Niko’s IBR is 10%.

Required:
1. Calculate the ROU asset.
2. Record the initial journal entry at commencement of the lease.
3. How much will Niko record as an asset if the residual value is unguaranteed?

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