1. 2. Crane Incorporated leases a piece of machinery to Pronghorn Company on January 1, 2020, under the following terms. The lease is to be for 4 years with rental payments of $9,977 to be made at the beginning of each year. The machinery' has a fair value of $53,600, a book value of $40,000, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of $20,000. To protect against a large loss, Crane requests Pronghorn to guarantee $13,750 of the residual value, which Irving agrees to do. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 5%, which is known by Pronghorn. Collectibility of the payments is probable. 3. 4. 6. Click here to view factor tables. Your answer is correct. Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a finance lease and for the lessor, it is a sales-type lease Your answer is partially correct. Prepare the journal entries for Pronghorn for the year 2020. (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 for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to decimal places eg. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Leased Equipment Lease Liability (To record lease) Lease Liability Jan. 1 Cash (To records first lease payment) INNO IM Dec. 31 Depreciation Expense Accumulated Depreciation Capital Leases (To record accrued interest) Dec. 31 (To record amortization expense) eTextbook and Media List of Accounts X Your answer is incorrect Prepare the journal entries for Crane for the year 2020. (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 for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to decimal places eg. 5,275.) Account Titles and Explanation Debit Credit Date Jan. 1 (To record lease) Jan. 1 (To record first lease payment) Dec. 31 (To record lease revenue) e Textbook and Media List of Accounts Your answer is correct. Evaluate the criteria for classification of the lease, and describe the nature of the lease, assuming that Pronghorn did not guarantee any amount of the expected residual value. For the lessee, it is a operating lease and for the lessor, it is a operating lease e Textbook and Media List of Accounts * Your answer is incorrect. Suppose Pronghorn did not guarantee any amount of the expected residual value. Prepare the journal entries for Pronghorn for the year 2020. (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 for the amounts. Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to 0 decimal places eg. 5,275.) Account Titles and Explanation Debit Credit Date Jan. 1 (To record lease) Jan. 1 (To record first lease payment) Dec. 31 (To record interest and amortization)
