Sheffield Corporation entered into a lease agreement on January 1, 2020, to provide Oriole Company with a piece of machinery. The terms of the lease agreement were as follows. 1. 2. 3. The lease is to be for 3 years with rental payments of $14,941 to be made at the beginning of each year. The machinery has a fair value of $60,000, a book value of $40,000, and an economic life of 8 years. At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. The implicit rate is 4%, which is known by Dawkins. Collectibility of the payments is probable. 4 5. 6. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a , and for the lessor, it is a Prepare the amortization schedules Oriole will use over the lease term. ORIOLE COMPANY Lease Amortization Schedule Annuity-Due Basis Interest Reduction of on Liability Lease Liability Date Annual Payment Leas 1/1/20 $ 1/1/20 $ $ $ 1/1/21 1/1/22 Lease Expense Schedule (A) Straight-Line Expense (B) Interest on Lease Liability (C) Amortization of Right-of-Use Asset (and Liability) (A-B) Date 1/1/20 $ 12/31/20 $ $ $ $ $ 12/31/21 12/31/22 Prepare the 2020 journal entries for Oriole. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1 (To record lease) Jan. 1 (To record first lease payment) Dec. 31 (To record lease expense and amortization) Prepare the 2020 journal entries for Sheffield. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) Debit Credit Date Account Titles and Explanation Jan. 1 (To record lease payments) Dec. 31 (To record lease revenue) Dec. 31 (To record depreciation) Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Oriole would need, assuming it elects to use the short-term lease option. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer too decimal places eg. 58,971.) Debit Credit Date Account Titles and Explanation Jan. 1