Herbonne Printing leases a digital press; 2 annual payments of 70,000 remain, paid at year end, and the lease liability amounts to 132,027 (original rate 4 %). After having the press adapted to its special formats, Herbonne becomes reasonably certain to exercise the purchase option of 30,000, payable at the end of the lease, which it had not taken into account so far. The interest rate implicit in the lease cannot be readily determined; Herbonne's incremental borrowing rate is now 6 %. Record the remeasurement entry (amount rounded to the nearest euro).
- Annual payment made at year end
- 70,000
- Remaining payments
- 2
- Exercise price of the purchase option
- 30,000
- Lease liability before remeasurement
- 132,027
- Original discount rate
- 4 %
- Incremental borrowing rate at the reassessment date
- 6 %