Question
On January 2, 2025, Oriole Leasing Company leases equipment to Grouper Co. with 5 equal annual payments of $163000 each, payable beginning January 2,
On January 2, 2025, Oriole Leasing Company leases equipment to Grouper Co. with 5 equal annual payments of $163000 each, payable beginning January 2, 2025. Grouper Co. agrees to guarantee the $103000 residual value of the asset at the end of the lease term. The expected value of the residual is $0. Grouper's incremental borrowing rate is 9%, however it knows that Oriole's implicit interest rate is 7%. The journal entry Grouper makes at January 2, 2025 includes a debit to right-of-use asset for PV Annuity Due PV Ordinary Annuity PV Single Sum 7%, 5 periods 4.38721 4.10020 0.71299 9%, 5 periods 4.23972 3.88965 0.64993 $788553 $715115 $735305 $758017
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