Problem
On January 1, 2021, Comfy Home enters into a 3-year operating lease for the building that houses one of its shops and offices. The lease gives Comfy Home the right to occupy the building for the calendar years 2021, 2022, and 2023. A lease payment in the amount of $40,000 is due on December 31, 2021. The next payment of $42,000 is due on December 31, 2022, and the final payment of $45,000 a year later. Comfy Home's cost of capital is 10%.
What is the value of the ROU asset on Comfy Home's 12/31/2022 balance sheet, after the first- and second-year payments have been made?