Answer:
$86,823
Explanation:
We are going to calculate amortization expense and right of use asset for the 2 years
Given
right-of-use asset of $100,000
Payments of $16,275
YEAR 1
Interest Expenses = 10% × $100,000
= $10000
Cash payments = $16,275
Amortization expense = $16,275 - $10000
= $6,275 (debit)
right of use asset = $6,275 (credit)
YEAR 2
Interest Expenses = 10% × $100,000 - $6,275
= $9373
Cash payments = $16,275
Amortization expense = $16,275 - $9373
= $6,902 (debit)
right of use asset = $6,902 (credit)
The balance in the right-of-use asset after two years will be
$100,000 - $6,275 - $6,902 = $86,823
Answer: $86,822.50
Explanation:
GIVEN the following ;
Right-of-use asset = $100,000
Annual payment = $16,275
Interest rate = 10% = 0.1
Calculate the balance in the Right-of-use asset after two years:
We calculate the amortization expense for YEAR 1 and YEAR 2, and deduct each year's amortization expense from the Right-of-use asset balance
Amortization expense = (Annual payment - interest on Right-of-use asset balance)
Right-of-use asset balance = $100,000
FIRST YEAR :
10% × $100,000 = $10,000
Annual payment = $16,275
Amortization expense = $(16,275 - $10,000) = $6,275
Right-of-use asset balance after first year = $100,000 - $6,275 = $93,725
YEAR 2:
10% × $93,725 = $9,372.50
Annual payment = $16,275
Amortization expense =$(16,275 - 9,372.50) = $6,902.50
Right-of-use asset balance after second year = $93,725 - $6,902.50 =$86, 822.50
