Oriole Company on January 1, 2021, enters into a 9-year noncancelable lease for equipment having an estimated useful life of 10 years and a fair value to the lessor, Daly Corp., at the inception of the lease of $4,200,000. Oriole's incremental borrowing rate is 6%. Oriole uses the straight-line method to depreciate its assets. The lease contains the following provisions:

1.		Rental payments of $262,000 are payable at the beginning of each six-month period.
2.		An option allowing the lessor to extend the lease one year beyond the lease term.
3.		A guarantee by Oriole Company that Daly Corp. will realize $235,000 from selling the asset at the expiration of the lease. However, the actual residual value is expected to be $125,000.

What kind of lease is this to Oriole Company?

What should be considered the lease term?

The lease term

years

What is the present value of the lease payments (1) for classification of the lease and (2) for measurement of the lease liability?

1.		$
2.		$

What journal entries would Oriole record during the first year of the lease?

Date	Account Titles and Explanation	Debit	Credit
January 1, 2021July 1, 2021December 31, 2021
	(To record lease)
January 1, 2021July 1, 2021December 31, 2021
	(To record first lease payment)
January 1, 2021July 1, 2021December 31, 2021
January 1, 2021July 1, 2021December 31, 2021
	(To record amortization)
January 1, 2021July 1, 2021December 31, 2021
	(To record interest payment)