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Crane Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,500 each, beginning December 31, 2024. In addition, Crane guarantees the lessor a residual value of $20,700 at the end of the lease. However, Crane believes it is probable that the expected residual value at the end of the lease term will be $10,350. The equipment has a useful life of 7 years.

Crane Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,500 each, beginning December 31, 2024. In addition, Crane guarantees the lessor a residual value of $20,700 at the end of the lease. However, Crane believes it is probable that the expected residual value at the end of the lease term will be $10,350. The equipment has a useful life of 7 years.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Crane Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,500 each, beginning December 31, 2024. In addition, Crane guarantees the lessor a residual value of $20,700 at the end of the lease. However, Crane believes it is probable that the expected residual value at the end of the lease term will be $10,350. The equipment has a useful life of 7 years. Prepare Cranes' December 31, 2024, journal entries, assuming the implicit rate of the lease is 11% and this is known to Crane. (List all debit entries before credit entries. Credit account titles are automatically indented when 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.) Click here to view factor tables. Date December 31, 2024 December 31, 2024 Account Titles and Explanation (To record the lease liability) (To record lease payment) Debit Credit I
Transcribed Image Text:Crane Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,500 each, beginning December 31, 2024. In addition, Crane guarantees the lessor a residual value of $20,700 at the end of the lease. However, Crane believes it is probable that the expected residual value at the end of the lease term will be $10,350. The equipment has a useful life of 7 years. Prepare Cranes' December 31, 2024, journal entries, assuming the implicit rate of the lease is 11% and this is known to Crane. (List all debit entries before credit entries. Credit account titles are automatically indented when 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.) Click here to view factor tables. Date December 31, 2024 December 31, 2024 Account Titles and Explanation (To record the lease liability) (To record lease payment) Debit Credit I
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