Kingbird Leasing Company agrees to lease equipment to Oriole Corporation on January 1, 2020. The following information relates to the lease agreement. 1. 2 3 The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $ 561.000, and the fair value of the asset on January 1, 2020, is $ 763,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $ 55,000. Oriole estimates that the expected residual value at the end of the lease term will be 55,000. Oriole amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. The collectibility of the lease payments is probable Kingbird desires a 10% rate of return on its investments Oriole's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown 4. 5. 6. (Assume the accounting period ends on December 31) Click here to view factor tables. Discuss the nature of this lease for both the lessee and the lessor. This is a finance lease for Oriole. This is a operating lease for Kingbird. e Textbook and Media List of Accounts X Your answer is incorrect. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, eg, 1.25124 and the final answer to 0 decimal places eg. 58,972.) Annual rental payment 147747 X Your answer is incorrect. Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to decimal places eg. 58,972.) Present value of minimum lease payments $ 799288 eTextbook and Media List of Accounts Prepare the journal entries Oriole would make in 2020 and 2021 related to the lease arrangement. (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 for the amounts. Round answers to decimal places eg. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/20 Leased Equipment 799288 Lease Liability 799288 (To record the lease.) Lease Liability 147747 Cash 147747 (To record lease payment.) 1/31/20 Depreciation Expense 93077 Accumulated Depreciation Capital Leases 93077 (To record amortization.) ! (To record amortization.) Interest Expense 71669 Interest Payable 71669 (To record interest.) 1/21 Lease Liability 76078 Interest Payable 71669 131/21 Depreciation Expense 93077 Accumulated Depreciation Capital Leases 93077 (To record amortization.) Interest Expense 63300 Interest Payable 63300 (To record interest.) Prepare the journal entries Kingbird would make in 2020 and 2021 related to the lease arrangement. (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 for the amounts. Round answers to decimal places eg. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Lease Receivable 763000 Cost of Goods Sold 561000 Sales Revenue 763000 Inventory 561000 (To record the lease.) /1/20 Cash 147747 Lease Receivable 147747 (To record lease payment.) 2/31/20 Cash 61525 2/31/20 Cash 61525 Interest Revenue 61525 11/21 Cash 61525 Lease Receivable 86222 2/31/21 Cash 52903 Interest Revenue 52903 eTextbook and Media List of Accounts x Your answer is incorrect. Suppose Oriole expects the residual value at the end of the lease term to be $ 45,000 but still guarantees a residual of $ 55,000. Compute the value of the lease liability at lease commencement. Lease liability $ eTextbook and Media Assistance Used List of Accounts Attempts: 1 of 4 used Submit Answer Save for Later Last saved 38 seconds ago Saved work will be auto-submitted on the due date. Auto- to me