Ostral leases a hangar; 2 annual payments of 40,000 remain, paid at year end, and the lease liability amounts to 74,376 (original rate 5 %). The lease contains no extension option. On 1 January 20X5, Ostral and the lessor sign an amendment adding 2 years at the same rent; it does not cover any additional asset. The interest rate implicit in the lease cannot be readily determined; Ostral's incremental borrowing rate at the effective date is 7 %. Compute the modified lease liability and the adjustment to the right-of-use asset (rounded to the nearest euro).
- Annual payment made at year end
- 40,000
- Payments remaining before the amendment
- 2
- Years added by the amendment
- 2
- Lease liability before the modification
- 74,376
- Original discount rate
- 5 %
- Incremental borrowing rate at the effective date
- 7 %