Journal entries are requested for the lessee's side for the year 20X2
(3)Company A rents a store from company B on 1.1.20X2. The duration of the lease is 5 years with the right to extend for another five years, while the annual lease is €18,000 for the first 5 years and €20,000 for the retention period. A paid the previous tenant €5,000 as well as €2,000 as brokerage fees to the real estate agents involved in the transaction. A judge at the commencement date of the lease that it is highly likely that it will not activate the right to extend. The marginal interest rate based on which the lessee could draw funds of the same amount as the right of use for the same duration and with similar collateral is 4%, while the present value of the 5 installments is €83,338.11 and the interest for the first year €2613.52.
Present value of lease rent = 83338.11
+ Fees to previous tenant= 7000
Right of use = 90338.11
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