I am in need of help with these questions: Oriole Inc. is involved in a lawsuit at December 31, 2017.
Prepare the December 31 entry assuming it is probable that Oriole will be liable for $975,700 as a result of the suit.
Prepare the December 31 entry, if any, assuming it is not probable that Oriole will be liable for any payment as a result of this suit.
Oriole, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $254152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4 year useful life and no salvage value. Oriole, Inc.’s incremental borrowing rate is 11% and the rate implicit in the lease (which is known by Oriole, Inc.) is 9%. Assuming that this lease is properly classified as a capital lease, what is the amount of principal reduction recorded when the second lease payment is made in Year 2?
PV Annuity Due
PV Ordinary Annuity
9%, 4 periods3.53129
11%, 4 periods3.44371
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