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Oriole, Inc. leases a piece of equipment to Ivanhoe Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,500 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $30,000, a book value of $27,000, and a useful life of 8 years. At the end of the lease term, Oriole expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Oriole wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when the 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, eg. 5,275) Click here to view factor tables. Account Titles and Explanation Lease Receivable Leased Asset Lease Revenue Debit 30,000 Credit 27,000 3000

Oriole, Inc. leases a piece of equipment to Ivanhoe Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,500 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $30,000, a book value of $27,000, and a useful life of 8 years. At the end of the lease term, Oriole expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Oriole wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when the 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, eg. 5,275) Click here to view factor tables. Account Titles and Explanation Lease Receivable Leased Asset Lease Revenue Debit 30,000 Credit 27,000 3000

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10P
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Oriole, Inc. leases a piece of equipment to Ivanhoe Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,500 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $30,000, a book value of $27,000, and a useful life of 8 years. At the end of the lease term, Oriole expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Oriole wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 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, eg. 5,275.) Click here to view factor tables. Account Titles and Explanation Lease Receivable Leased Asset Lease Revenue Debit 30,000 Credit 27,000 3000
Transcribed Image Text:Oriole, Inc. leases a piece of equipment to Ivanhoe Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $4,500 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $30,000, a book value of $27,000, and a useful life of 8 years. At the end of the lease term, Oriole expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Oriole wants to earn a 4% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 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, eg. 5,275.) Click here to view factor tables. Account Titles and Explanation Lease Receivable Leased Asset Lease Revenue Debit 30,000 Credit 27,000 3000
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