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Question - Oriole Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,144 at the beginning of each year. The first payment is received on January 1, 2020. Oriole had purchased the machine during 2019 for $123,000. Collectibility of lease payments by Oriole is probable. Oriole set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Oriole at the termination of the lease.
Required -
1. Compute the amount of the lease receivable.
2. Preparee all necessary journal entries for Oriole for 2020.
3. Suppose the collectibility of the lease payments was not probable for Oriole. Prepare the necessary journal entry for the company in 2020?
4. Suppose at the end of the lease term, Oriole receives the asset and determines that it actually has a fair value of $1,270 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Oriole at the end of the lease term.
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