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Ivanhoe Company, a machinery dealer, leased a machine to Oriole Corporation on January 1,2025. The...

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Accounting

Ivanhoe Company, a machinery dealer, leased a machine to Oriole Corporation on January 1,2025. The lease is for an 8-year period
and requires equal annual payments of $31,300 at the beginning of each year. The first payment is received on January 1,2025.
Ivanhoe had purchased the machine during 2024 for $170,000. Collectibility of lease payments by Ivanhoe is probable. Ivanhoe set
the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and reverts to
Ivanhoe at the termination of the lease. Assume that Oriole Corporation does not know the rate implicit in the lease used by Ivanhoe,
and Oriole's incremental borrowing rate is 9%. In addition, assume that Oriole incurs initial direct costs of $13,000.
Click here to view factor tables.
(a)
Compute the amount of the lease liability and right-of-use asset for Oriole. (For calculation purposes, use 5 decimal places as
displayed in the factor table provided and round final answers to 0 decimal places e.g.5,275.)
Lease liability
Right-of-use asset
image

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