What is a right-of-use asset? How is it reported on a balance sheet?

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What is a right-of-use asset? How is it reported on a balance sheet?

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What is a right-of-use asset? How is it reported on a balance sheet?

Explanation & AnswerSolution by a verified expert

Explanation

The right-of-use asset is the right granted to the lessee to use the asset during the period of lease. It is the recorded value of the asset included in a lease agreement. The recorded value of the asset is calculated by adding the present value of lease payments and any direct cost incurred during the lease term and then deducting any incentives received on the behalf of the asset from the resulting figure.
The right-of-use asset is recorded as an asset in the balance sheet at its recorded value. It is depreciated over the term of the lease agreement.

Verified Answer

The right-of-use asset is the right acquired by lessee to utilize the asset over the term of the lease contract.
The right-of-use asset is presented on the asset side under fixed assets in the balance sheet and is depreciated over the term of the lease contract.

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