Crane Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Swifty Limited a replicator that cost $266,000 to manufacture and usually sells for $417,000. The lease agreement covers the replicator's 4-year useful life and requires four equal annual rentals of $107.739 each, beginning May 29, 2020. The equipment reverts to Crane at the end of the lease, at which time it is expected that the replicator will have a residual value of $43,000, which is not guaranteed by Swifty, the lessee. An interest rate of 8% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare Crane's May 29, 2020 journal 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. Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, e.g. 5,275.) Date May 29 Account Titles and Explanation Lease Receivable Cost of Goods Sold Sales Revenue Inventory Unearned Interest Income (To record inception of lease.) Debit 464583 266000 III Credit 385393 266000 79190
Crane Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Swifty Limited a replicator that cost $266,000 to manufacture and usually sells for $417,000. The lease agreement covers the replicator's 4-year useful life and requires four equal annual rentals of $107.739 each, beginning May 29, 2020. The equipment reverts to Crane at the end of the lease, at which time it is expected that the replicator will have a residual value of $43,000, which is not guaranteed by Swifty, the lessee. An interest rate of 8% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare Crane's May 29, 2020 journal 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. Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, e.g. 5,275.) Date May 29 Account Titles and Explanation Lease Receivable Cost of Goods Sold Sales Revenue Inventory Unearned Interest Income (To record inception of lease.) Debit 464583 266000 III Credit 385393 266000 79190
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Crane Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Swifty Limited a replicator that cost
$266,000 to manufacture and usually sells for $417,000. The lease agreement covers the replicator's 4-year useful life and requires
four equal annual rentals of $107.739 each, beginning May 29, 2020. The equipment reverts to Crane at the end of the lease, at
which time it is expected that the replicator will have a residual value of $43,000, which is not guaranteed by Swifty, the lessee. An
interest rate of 8% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important
uncertainties concerning costs.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
Prepare Crane's May 29, 2020 journal 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. Round factor values to 5 decimal places,
eg. 1.25124 and final answers to O decimal places, e.g. 5,275.)
Date Account Titles and Explanation
May 29
Lease Receivable
Cost of Goods Sold
Sales Revenue
Inventory
Unearned Interest Income
(To record inception of lease.)
Debit
464583
266000
I
Credit
385393
266000
79190
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