Oriole Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65.000 and fair value of $87,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1. 2020. Oriole expects to earn an 8% return on its investment. and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places eg. 5,275) Rent Receipt/ Payment Interest Revenue/ Expense Reduction of Principal Receivable/ Liability Prepare the journal entry at commencement of the lease for Oriole. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Oriole's implicit rate (Sharrer's incremental borrowing rate is 99%), and (2) Sharrer incurs initial directs costs of $9.500. (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 O decimal places eg. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20
Oriole Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65.000 and fair value of $87,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1. 2020. Oriole expects to earn an 8% return on its investment. and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places eg. 5,275) Rent Receipt/ Payment Interest Revenue/ Expense Reduction of Principal Receivable/ Liability Prepare the journal entry at commencement of the lease for Oriole. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Oriole's implicit rate (Sharrer's incremental borrowing rate is 99%), and (2) Sharrer incurs initial directs costs of $9.500. (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 O decimal places eg. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20
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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Transcribed Image Text:Oriole Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $87,000.
Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year
useful life and no residual value. The lease was signed on January 1,2020. Oriole expects to earn an 8% return onits investment,
and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020.
Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years
involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal
places eg. 5,275.)
Rent Receipt/ Payment
Interest Revenue/ Expense
Reduction of Principal
Receivable/ Liability
Prepare the journal entry at commencement of the lease for Oriole. (Credit account titles are automatically indented when amount
is entered. Do not indent manually.)
Date Account Titles and Explanation
Debit
Credit
1/1/20
Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when
amount is entered. Do not indent manually.)
Date Account Titles and Explanation
Debit
Credit
1/1/20
Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Oriole's implicit rate
(Sharrer's incremental borrowing rate is 9%6), and (2) Sharrer incurs initial directs costs of $9,500. (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 O decimal places eg. 5,275.)
Date Account Titles and Explanation
Debit
Credit
1/1/20
%24
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