Crane Company leases a building to Blossom, Inc. on January 1, 2025. The following facts pertain to the lease agreement. 1. 2. 3. 4. 5. The lease term is 4 years, with equal annual rental payments of $8,278 at the beginning of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The building has a fair value of $36,000, a book value to Crane of $29,000, and a useful life of 5 years. At the end of the lease term, Crane and Blossom expect there to be an unguaranteed residual value of $6,295. Crane wants to earn a return of 5% on the lease, and collectibility of the payments is probable. This rate is known by Blossom. Click here to view factor tables. (b) Using the original facts of the lease, show the journal entries to be made by both Crane and Blossom in 2025. (List all debit entries before credit entr amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decima entered. Do not indent manually.)
Crane Company leases a building to Blossom, Inc. on January 1, 2025. The following facts pertain to the lease agreement. 1. 2. 3. 4. 5. The lease term is 4 years, with equal annual rental payments of $8,278 at the beginning of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The building has a fair value of $36,000, a book value to Crane of $29,000, and a useful life of 5 years. At the end of the lease term, Crane and Blossom expect there to be an unguaranteed residual value of $6,295. Crane wants to earn a return of 5% on the lease, and collectibility of the payments is probable. This rate is known by Blossom. Click here to view factor tables. (b) Using the original facts of the lease, show the journal entries to be made by both Crane and Blossom in 2025. (List all debit entries before credit entr amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decima entered. Do not indent manually.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Crane Company leases a building to Blossom, Inc. on January 1, 2025. The following facts pertain to the lease agreement.
1.
2.
3.
4.
5.
The lease term is 4 years, with equal annual rental payments of $8,278 at the beginning of each year.
Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.
The building has a fair value of $36,000, a book value to Crane of $29,000, and a useful life of 5 years.
At the end of the lease term, Crane and Blossom expect there to be an unguaranteed residual value of $6,295.
Crane wants to earn a return of 5% on the lease, and collectibility of the payments is probable. This rate is known by Blossom.
Click here to view factor tables.
(b) Using the original facts of the lease, show the journal entries to be made by both Crane and Blossom in 2025. (List all debit entries before credit entri
amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal
entered. Do not indent manually.)
Crane's Journal Entries
Date
1/1/25
1/1/25
12/31/25 +
Date
Account Titles and Explanation
1/1/25
Lease Receivable
Cost of Goods Sold
Sales Revenue
Inventory
(To record the lease)
cash
Lease Receivable
(To record lease payment)
Lease Receivable
Blossom's Journal Entries
Interest Revenue
Account Titles and Explanation
Right-of-Use Asset
Debit
36000
Debit
31045
|||||
OLUL VO
8278
1386.1
Credit
36244
Credit
36244
29000
8278
1386
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