Question
On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon lease term of 3 years. Oriole agreed to make annual
On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon lease term of 3 years. Oriole agreed to make annual lease payments of $14,500, beginning on December 31, 2019. The expected residual value of the machinery at the end of the lease term is $7,250. Oriole guarantees a residual value of $7,250 at the end of the lease term, which equals the expected residual value of the machinery. What amount will Oriole record as its lease liability if the expected residual value at the end of the lease term is $4,250 and Oriole guarantees a residual of $7,250. Its incremental borrowing rate is 7% and the implicit rate of the lease is unknown?
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