SSI Corporation leased equipment to RRI Company on January 1, 20X6, for a 10-year lease. The equipment has an economic life of 20 years, a residual value at the end of lease term of $20,000, and a residual value at the end of economic life of zero. RRI incurred legal fees of $5,000 to negotiate the terms of the lease agreement. The lease contains a purchase option that allows RRI to purchase the leased equipment at the end of the lease term for $10,000. Equal lease payments of $5,000 are made on each December 31, with the first payment made on December 31, 20X6.The applicable interest rate to both the lessee and the lessor is 8%. What is the total amount that RRI should capitalize as a right-of-use asset on January 1, 20X6? 

Multiple Choice

$42,814 

$38,182 

$51,236 

$43,182

Answer rating: 100% (QA)

Present value of lease payment Amount x PV of annuity 8 ... View the full answer