Oriole Corporation enters into a 6-year lease of equipment on December 31, 2024, which requires 6 annual payments of $36,300 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $18,400 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 6 years. Prepare Orioles' December 31, 2024, journal entries, assuming the implicit rate of the lease is 11% and this is known to Oriole. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables

Oriole Corporation enters into a 6-year lease of equipment on December 31, 2024, which requires 6 annual payments of $36,300 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $18,400 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 6 years. Prepare Orioles' December 31, 2024, journal entries, assuming the implicit rate of the lease is 11% and this is known to Oriole. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2020, is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. Instructions (Assume the accounting period ends on…
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Plessings Company leased a piece of machinery to Banana, Inc. on January 1, 2023. The lease is correctly classified as a sales-type lease. Plessings will receive three annual lease payments of $20,900, with the first one received on January 1, 2023. There is no guaranteed or unguaranteed residual value. The fair value of the machine is $50,000 and Plessings incurs initial direct costs of $5,000. What is the implicit rate assuming the initial direct costs are expensed? Group of answer choices 27.95% 14.72% 6.85% 12.23%
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Monty Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $41,100 each, beginning December 31, 2019. In addition, Monty guarantees the lessor a residual value of $18,400 at the end of the lease. However, Monty believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 7 years.Prepare Montys' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Monty. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)Click here to view factor tables. Date Enter Account Titles Debit Credit December 31, 2019 1- 2- (To record the lease liability) December 31, 2019…
Oriole Corporation enters into a 5-year lease of equipment on December 31, 2024, which requires 5 annual payments of $36,200 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $20,300 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $10,300. The equipment has a useful life of 5 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $120,000. Prepare Lost Ark's 2024 and 2025 journal entries, assuming the implicit rate of the lease is 10% and this is known to Oriole. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For…
On January 1, 2023, Shrek Inc. enters into a seven-year non-cancellable lease with Fiona Ltd. for machinery having an estimated useful life of nine years and a fair value of $4,300,000. Shrek's incremental borrowing rate is 8% and Fiona's implicit rate is 6%. Shrek uses the straight-line depreciation method to depreciate assets. Shrek will make annual lease payments on January 1 of each year. The lease includes a guarantee by Shrek Inc. that Fiona Ltd. will realize $100,000 from selling the asset at the expiration of the lease, which Shrek expects to pay. Both companies adhere to IFRS. Instructions a) Calculate the lease payment Fiona Ltd. will charge Shrek (assuming no mark-up of the machinery from fair value). Round to the nearest dollar. b) Calculate the present value of the lease payments. Round to the nearest dollar. c) What kind of lease is this to Shrek Inc.? Why? d) Present the journal entries that Shrek Inc. would record during the first year of the lease. Round to the nearest…