Oriole Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $55,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Orioles incremental borrowing rate is 8%. Oriole is unaware of the rate being used by the lessor. At the end of the lease, Oriole has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Oriole uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.

(a)

Prepare the journal entries, that Oriole should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 58,971.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2020
	(To record leased asset and related liability.)
	(To record the first rental payment.)

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(b)

Prepare the journal entries, that Oriole should record on December 31, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2021
	(To record amortization.)
	(To record annual payment on lease liability.)

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(c)

Prepare the journal entries, that Oriole should record on December 31, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2022
	(To record annual amortization on leased assets.)
	(To record annual payment on lease liability.)

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(d)

What amounts would appear on Orioles December 31, 2022, balance sheet relative to the lease arrangement? (Round answers to 0 decimal places, e.g. 58,971.)

ORIOLE STEEL COMPANY Balance Sheet December 31, 2022For the Year Ended December 31, 2022For the Quarter Ended December 31, 2022
Assets
Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' EquityNon-current Assets
		$
Liabilities
Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' EquityNon-current Assets
		$
Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' EquityNon-current Assets
		$

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