Crane Corporation agrees on January 1, 2025, to lease equipment from Cullumber, Inc. for 3 years. The lease calls for annual lease payments of $19,500 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare Crane' journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is 6%, and this is known to Crane. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to "O" decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation 1/1/25 12/31/25 (To record lease liability) (To record lease payment) Debit Credit
Crane Corporation agrees on January 1, 2025, to lease equipment from Cullumber, Inc. for 3 years. The lease calls for annual lease payments of $19,500 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare Crane' journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is 6%, and this is known to Crane. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to "O" decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation 1/1/25 12/31/25 (To record lease liability) (To record lease payment) Debit Credit
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
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Transcribed Image Text:Crane Corporation agrees on January 1, 2025, to lease equipment from Cullumber, Inc. for 3 years. The lease calls for annual lease
payments of $19,500 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is
not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less
than 90% of the fair value of the equipment.
Prepare Crane' journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the
implicit rate used by the lessor is 6%, and this is known to Crane. (List all debit entries before credit entries. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to "O"
decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
Account Titles and Explanation
1/1/25
12/31/25
(To record lease liability)
(To record lease payment)
Debit
Credit
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