On December 31, 2016, Oriole Company leased machinery from Terminator Corporation for an agreed upon lease term of 3 years. Oriole agreed to make annual lease payments of $18,000,
beginning on December 31, 2016. The expected residual value of the machinery at the end of the lease term is $9,000, though Oriole does not guarantee any residual value to Terminator.
What amount will Oriole record as its lease liability on December 31, 2016, if its incremental borrowing rate is 8% and the implicit rate of the lease is unknown? (For calculation purposes, use 5
decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.)
Click here to view the factor table.
Lease liability $