Find what oriole should record

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Problem 1: On January 1, 2021, Oriole Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Oriole to make annual payments of $235000 at the end of each year for 10 years with the title passing to Oriole at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Oriole uses the straight-line method of depreciation for all of its fixed assets. Oriole accordingly accounted for this lease transaction as a financial lease. The lease payments were determined to have a present value of $1650542 at an effective interest rate of 7%. With respect to this lease, Oriole should record for 2021

Option 1: interest expense of $101538 and amortization expense of $165054.
Option 2: interest expense of $115538 and amortization expense of $110036.
Option 3: lease expense of $115538.
Option 4: interest expense of $110036 and amortization expense of $96703.

Reference no: EM132761815

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