Crane Leasing Company leases a new machine to Cullumber Corporation. The machine has a cost of $65,000 and fair value of $85,500. Under the 3-year, non-cancelable contract, Cullumber will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Crane expects to earn an 8% return on its investment, and this implicit rate is known by Cullumber. The annual rentals are payable on each December 31, beginning December 31, 2025. Click here to view factor tables. (b) (c) Prepare the journal entry at commencement of the lease for 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 0 for the amounts.) Part B) Prepare the journal entry at commencement of the lease for Sharrer. ( Credit account titles are automatically indented when amount is entered. Do not indent manually.) Part C) Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Crane's implicit rate ( Sharrer's incremental borrowing rate is 9), and (2) Sharrer incurs initial directs costs of $8,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
Crane Leasing Company leases a new machine to Cullumber Corporation. The machine has a cost of $65,000 and fair value of $85,500. Under the 3-year, non-cancelable contract, Cullumber will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Crane expects to earn an 8% return on its investment, and this implicit rate is known by Cullumber. The annual rentals are payable on each December 31, beginning December 31, 2025. Click here to view factor tables. (b) (c) Prepare the journal entry at commencement of the lease for 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 0 for the amounts.) Part B) Prepare the journal entry at commencement of the lease for Sharrer. ( Credit account titles are automatically indented when amount is entered. Do not indent manually.) Part C) Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Crane's implicit rate ( Sharrer's incremental borrowing rate is 9), and (2) Sharrer incurs initial directs costs of $8,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Crane Leasing Company leases a new machine to Cullumber Corporation. The machine has a cost of $65,000 and fair
value of $85,500. Under the 3-year, non-cancelable contract, Cullumber will receive title to the machine at the end of
the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Crane
expects to earn an 8% return on its investment, and this implicit rate is known by Cullumber. The annual rentals are
payable on each December 31, beginning December 31, 2025. Click here to view factor tables. (b) (c) Prepare the
journal entry at commencement of the lease for 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 0 for the amounts.) Part B) Prepare the journal entry at commencement of the lease for Sharrer. (
Credit account titles are automatically indented when amount is entered. Do not indent manually.) Part C) Prepare the
journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Crane's implicit rate (
Sharrer's incremental borrowing rate is 9), and (2) Sharrer incurs initial directs costs of $8,000. (Credit account titles are
automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places
as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
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