Question
On December 31, 2018, Oriole, Inc. leased machinery with a fair value of $1725000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease
On December 31, 2018, Oriole, Inc. leased machinery with a fair value of $1725000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease requiring annual payments of $330000 beginning December 31, 2018. The lease is appropriately accounted for by Oriole as a finance lease. Oriole's incremental borrowing rate is 11%. Oriole knows the interest rate implicit in the lease payments is 10%. The present value of an annuity due of 1 for 6 years at 10% is 4.79080. The present value of an annuity due of 1 for 6 years at 11% is 4.69590. In its December 31, 2018 balance sheet, Oriole should report a lease liability of $1395000. $1250964. $1549647. O $1580964
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