Oriole Company, as lessee, enters into a lease agreement on July $1,2025,$ for equipment. The following data are relevant to the lease agreement:

The term of the noncancelable lease is $4$ years. Payments of $$860,875$ are due on July $1$ of each year.

The fair value of the equipment on July $1,2025$ is $$3,040,000.$ The equipment has an economic life of $6$ years with no salvage value.

Oriole depreciates similar machinery it owns on the sum$-$of$-$the$-$years'$-$digits basis.

The lessee pays all executory costs.

Oriole's incremental borrowing rate is $10\%$ per year. The lessee is aware that the lessor used an implicit rate of $9\%$ in computing the lease payments $($present value factor for $4$ periods at $9\%,3\mathrm{.}53129$; at $10\%,3\mathrm{.}48685).$

Click here to view factor tables.

Indicate the type of lease Oriole Company has entered into and what accounting treatment is applicable.

$$

$$

Prepare the journal entries on Oriole's books that relate to the lease agreement for the following dates assuming that Oriole Company uses reversing entries. $($Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select $"$No Entry" for the account titles and enter O for the amounts. Round answers to $0$ decimal places, eg$,5,275.]$

July $1,2025.$

December $31,2025.$

July $1,2026.$

December $31,2026.$

Date

Account Titles and Explanation

DebitOriole Company, as lessee, enters into a lease agreement on July $1,2025,$ for equipment. The following data are relevant to the lease agreement:

The term of the noncancelable lease is $4$ years. Payments of $$860,875$ are due on July $1$ of each year.

The fair value of the equipment on July $1,2025$ is $$3,040,000.$ The equipment has an economic life of $6$ years with no salvage value.

Oriole depreciates similar machinery it owns on the sum$-$of$-$the$-$years'$-$digits basis.

The lessee pays all executory costs.

Oriole's incremental borrowing rate is $10\%$ per year. The lessee is aware that the lessor used an implicit rate of $9\%$ in computing the lease payments $($present value factor for $4$ periods at $9\%,3\mathrm{.}53129$; at $10\%,3\mathrm{.}48685).$

Click here to view factor tables.

Indicate the type of lease Oriole Company has entered into and what accounting treatment is applicable.

$$

$$

Prepare the journal entries on Oriole's books that relate to the lease agreement for the following dates assuming that Oriole Company uses reversing entries. $($Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select $"$No Entry" for the account titles and enter O for the amounts. Round answers to $0$ decimal places, eg$,5,275.]$

July $1,2025.$

December $31,2025.$

July $1,2026.$

December $31,2026.$

Date

Account Titles and Explanation

Debit