Exercise 13-3 Lessee accounting and reporting for a finance lease (LO 13-4, LO 13-6) East Company leased a new machine from North Company on May 1, 20X1, under a lease with the following information: Lease term Annual rental payable at beginning of each lease year Useful life of machine Incremental interest rate Implicit interest rate 10 years $ 40,000 Right-of-use finance lease asset 12 years 12 % 15 % East has the option to purchase the machine on May 1, 20Y1, by paying $50,000, which approximates the expected fair value of the machine on the option exercise date. Use tables (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.) Required: What is the amount of the right-of-use finance lease asset on May 1, 20X1? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.