Oriole Company specializes in leasing large storage units to other businesses. Oriole entered a contract to lease a storage unit to Ivanhoe, Inc. for 4 years when that particular storage unit had a remaining useful life of 5 years. The fair value of the unit was $15,000 at the commencement of the lease on January 1, 2025. The present value of the five equal rental payments of $3,808 at the start of each year, plus the present value of a guaranteed residual value of $1,000, equals the fair value of $15,000, Oriole's implicit rate of return on the lease of 5%. The following is a correct, complete amortization schedule created by Oriole. Date 1/1/25 1/1/25 1/1/26 1/1/27 1/1/28 12/31/28 Lease Payment $3,808 3,808 3,808 3,808 1,000 $16,232 Interest (5%) on Outstanding Lease Receivable $560 397 227 48 $1,232 Reduction of Lease Receivable $3,808 3,248 3,411 3,581 952 $15,000 Balance of Lease Receivable $15,000 11,192 7,944 4,533 952 0 Given the above schedule, make the appropriate entries at December 31, 2028, to record the accrual of interest and the return of the storage unit to Oriole (assuming the unit is returned on December 31, 2028, at the expected and guaranteed residual value of $1,000). (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit the amount is entered. Do not indent manually
Oriole Company specializes in leasing large storage units to other businesses. Oriole entered a contract to lease a storage unit to Ivanhoe, Inc. for 4 years when that particular storage unit had a remaining useful life of 5 years. The fair value of the unit was $15,000 at the commencement of the lease on January 1, 2025. The present value of the five equal rental payments of $3,808 at the start of each year, plus the present value of a guaranteed residual value of $1,000, equals the fair value of $15,000, Oriole's implicit rate of return on the lease of 5%. The following is a correct, complete amortization schedule created by Oriole. Date 1/1/25 1/1/25 1/1/26 1/1/27 1/1/28 12/31/28 Lease Payment $3,808 3,808 3,808 3,808 1,000 $16,232 Interest (5%) on Outstanding Lease Receivable $560 397 227 48 $1,232 Reduction of Lease Receivable $3,808 3,248 3,411 3,581 952 $15,000 Balance of Lease Receivable $15,000 11,192 7,944 4,533 952 0 Given the above schedule, make the appropriate entries at December 31, 2028, to record the accrual of interest and the return of the storage unit to Oriole (assuming the unit is returned on December 31, 2028, at the expected and guaranteed residual value of $1,000). (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit the amount is entered. Do not indent manually
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Oriole Company specializes in leasing large storage units to other businesses. Oriole entered a contract to lease a storage unit to
Ivanhoe, Inc. for 4 years when that particular storage unit had a remaining useful life of 5 years. The fair value of the unit was $15,000
at the commencement of the lease on January 1, 2025. The present value of the five equal rental payments of $3,808 at the start of
each year, plus the present value of a guaranteed residual value of $1,000, equals the fair value of $15,000, Oriole's implicit rate of
return on the lease of 5%. The following is a correct, complete amortization schedule created by Oriole.
Date
1/1/25
1/1/25
1/1/26
1/1/27
1/1/28
12/31/28
Lease Payment
$3,808
3,808
3,808
3,808
1,000
$16,232
Interest
(5%) on
Outstanding
Lease
Receivable
$560
397
227
48
$1,232
Reduction of
Lease
Receivable
$3,808
3,248
3,411
3,581
952
$15,000
Balance of
Lease
Receivable
$15,000
11.192
7,944
4,533
952
0
Given the above schedule, make the appropriate entries at December 31, 2028, to record the accrual of interest and the return of the
storage unit to Oriole (assuming the unit is returned on December 31, 2028, at the expected and guaranteed residual value of $1,000).
(List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit
account titles are automatically indented when the amount is entered. Do not indent manually.)
Transcribed Image Text:Account Titles and Explanation
Inventory
Lease Receivable
(To record accrual of interest)
Lease Receivable
Interest Revenue
Debit
1000
48
Credit
1000
48
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