Fox Co. leases equipment for 10 years, prepaying Owl Co. $100,000 before lease commencement date. Owl then paid Fox $50,000 as a lease incentive to terminate another lease in which Fox was lessee. Fox also paid an attorney $11,000 to negotiate the deal and draft the lease contract which requires Fox paying $65,000 at the beginning of each month for the 10 lease year. Fox's discount rate is 5%.

What is Fox’s Initial Lease Liability?

What amount should Fox initially record for its right-of-use asset?

What amount would Fox initially record for its right-of-use asset if the lease was a finance-type lease?

Answer rating: 100% (QA)

To calculate Foxs initial lease liability we need to consider the prepayment made to Owl Co the lease incentive received from Owl Co and the lease payments to be made by Fox over the lease term 1 Prep... View the full answer