Crane Corporation manufactures drones. On December 31, 2024, it leased to Althaus Company a drone that had cost $156,000 to manufacture. The lease agreement covers the 5-year useful life of the drone and requires five equal annual rentals of $52,800 payable each December 31, beginning December 31, 2024. An interest rate of 6% is implicit in the lease agreement. Collectibility of the rentals is not probable. Prepare any journal entry for Crane on December 31, 2024. (List debit entry before credit entry. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Cash Lease Receivable Debit Click here to view factor tables. 52800 Credit 52800 Cullumber Inc. leased a new crane to Bramble Construction under a 5-year, non-cancelable contract starting January 1, 2025. Terms of the lease require payments of $45,000 each January 1, starting January 1, 2025. The crane has an estimated life of 7 years, a fair value of $220,000, and a cost to Cullumber of $220,000. The estimated fair value of the crane is expected to be $40,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Cullumber and Bramble adjust and close books annually at December 31. Collectibility of the lease payments is probable. Bramble's incremental borrowing rate is 8%, and Cullumber's implicit interest rate of 8% is known to Bramble.
Crane Corporation manufactures drones. On December 31, 2024, it leased to Althaus Company a drone that had cost $156,000 to manufacture. The lease agreement covers the 5-year useful life of the drone and requires five equal annual rentals of $52,800 payable each December 31, beginning December 31, 2024. An interest rate of 6% is implicit in the lease agreement. Collectibility of the rentals is not probable. Prepare any journal entry for Crane on December 31, 2024. (List debit entry before credit entry. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Cash Lease Receivable Debit Click here to view factor tables. 52800 Credit 52800 Cullumber Inc. leased a new crane to Bramble Construction under a 5-year, non-cancelable contract starting January 1, 2025. Terms of the lease require payments of $45,000 each January 1, starting January 1, 2025. The crane has an estimated life of 7 years, a fair value of $220,000, and a cost to Cullumber of $220,000. The estimated fair value of the crane is expected to be $40,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Cullumber and Bramble adjust and close books annually at December 31. Collectibility of the lease payments is probable. Bramble's incremental borrowing rate is 8%, and Cullumber's implicit interest rate of 8% is known to Bramble.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Crane Corporation manufactures drones. On December 31, 2024, it leased to Althaus Company a drone that had cost $156,000 to
manufacture. The lease agreement covers the 5-year useful life of the drone and requires five equal annual rentals of $52,800 payable
each December 31, beginning December 31, 2024. An interest rate of 6% is implicit in the lease agreement. Collectibility of the rentals
is not probable.
Prepare any journal entry for Crane on December 31, 2024. (List debit entry before credit entry. If no entry is required, select "No Entry" for
the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent
manually.)
Account Titles and Explanation
Cash
Lease Receivable
Debit
Click here to view factor tables.
52800
Credit
52800
Cullumber Inc. leased a new crane to Bramble Construction under a 5-year, non-cancelable contract starting January 1, 2025. Terms of
the lease require payments of $45,000 each January 1, starting January 1, 2025. The crane has an estimated life of 7 years, a fair value
of $220,000, and a cost to Cullumber of $220,000. The estimated fair value of the crane is expected to be $40,000 (unguaranteed) at
the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both
Cullumber and Bramble adjust and close books annually at December 31. Collectibility of the lease payments is probable. Bramble's
incremental borrowing rate is 8%, and Cullumber's implicit interest rate of 8% is known to Bramble.
Transcribed Image Text:Prepare all the entries related to the lease contract and leased asset for the year 2025 for the lessee and lessor, assuming Bramble
uses straight-line amortization for all similar leased assets, and Cullumber depreciates the asset on a straight-line basis with a
salvage value of $15,000. (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. Round present value factor calculations to 5 decimal places,
e.g. 1.25125 and the final answer to O decimal places e.g. 58,972. List all debit entries before credit entries.)
e
1/1/25
1/1/25
12/31/25
1/1/25
12/31/25
12/31/25
Account Titles and Explanation
Lessee's Entries
Right-of-Use Asset
Lease Liability
(To record lease.)
Lease Liability
Cash
(To record lease payment.)
Lease Expense
Lease Liability
Right-of-Use Asset
Lessor's Entries
Cash
Unearned Lease Revenue
Unearned Lease Revenue
Lease Revenue
(To record depreciation.)
Depreciation Expense
Accumulated Depreciation-Leased Equipment
(To record lease revenue.)
Debit
||||
45000
45000
45000
28571
45000
45000
Credit
45000
45000
28571
45000
45000
14264
30736
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