1. Leasing (25% ABC Group leased a new crane to XYZ Construction under a 4-year, non-cancelable contract starting January 1, 2019. Terms of the lease require payments each January 1 and July 1, starting January 1, 2019. The crane has an estimated life of 6 years, a fair value of $480,000, and a cost to ABC of $400,000. The estimated fair value of the crane is expected to be $90,000 (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 ABC and XYZ adjust and close books annually at December 31. Collectibility of the lease payments is probable. XYZ's incremental borrowing rate is 8%, and ABC's implicit interest rate of 8% is known to XYZ Instruction a) Calculate the amount of annual rental payment required. b) Prepare an amortization schedule that would be suitable for the lessee & lessor. c) Prepare the journal entries ABC & XYZ would make in 2019 and 2020 related to the lease arrangement. Assume the annual accounting period ends on December 31. 3.31213 5.74664 PV of 1 for 4 periods at 8% 0.73503 PV of 1 for 8 periods at 8% 0.54027 PV of annuity due of 1 for 4 period at 8% PV of annuity due of 1 for 8 period at 8% PV of annuity due for 4 periods at 8% PV of annuity due for 8 periods at 8% 3.57710 6.20637 1. Leasing (25% ABC Group leased a new crane to XYZ Construction under a 4-year, non-cancelable contract starting January 1, 2019. Terms of the lease require payments each January 1 and July 1, starting January 1, 2019. The crane has an estimated life of 6 years, a fair value of $480,000, and a cost to ABC of $400,000. The estimated fair value of the crane is expected to be $90,000 (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 ABC and XYZ adjust and close books annually at December 31. Collectibility of the lease payments is probable. XYZ's incremental borrowing rate is 8%, and ABC's implicit interest rate of 8% is known to XYZ Instruction a) Calculate the amount of annual rental payment required. b) Prepare an amortization schedule that would be suitable for the lessee & lessor. c) Prepare the journal entries ABC & XYZ would make in 2019 and 2020 related to the lease arrangement. Assume the annual accounting period ends on December 31. 3.31213 5.74664 PV of 1 for 4 periods at 8% 0.73503 PV of 1 for 8 periods at 8% 0.54027 PV of annuity due of 1 for 4 period at 8% PV of annuity due of 1 for 8 period at 8% PV of annuity due for 4 periods at 8% PV of annuity due for 8 periods at 8% 3.57710 6.20637