Assume that on January 1, 2025, Elmer's Restaurants sells a computer system to Crane Finance Co, for $640,000 and immediately leases back the computer system. The relevant information is as follows. 1. The computer was carried on Eimer's books at a value of $560,000. 2. The term of the non-cancelable lease is 3 years; title will not transfer to Eimer's, and the expected residual value at the end of the lease is $410,000, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $117,590 at the beginning of each year. 4. The incremental borrowing rate for Elmer's is 5%. Elmer's is aware that Crane Finance set the annual rental to ensure a rate of return of 5% 5. The computer has a fair value of $640,000 on January 1,2025 , and an estimated economic life of 10 years. Prepare the journal entries for both the lessee and the lessor for 2025 to record the sale and leaseback agreement (For calculation purposes, use 5 decimal places as displayed in the foctor table provided and round answers to 0 decimal ploces, es. 5,275. List all debit entries before credit entries. Credit occount 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 Ofor the amounts. Record loumal entries in the order presented in the problem.) Click here to view factor tables. Elmer'sRottaureats (Cested) (To record sale of equipment) (To record the lease) (To record lease payment) Crane Finance Co (tessor) (To record purchase of equipment) (To record the leaseback) (To record the recognition of the revenue) (To record depreciation expense on the leased equipment) Assume that on January 1, 2025, Elmer's Restaurants sells a computer system to Crane Finance Co, for $640,000 and immediately leases back the computer system. The relevant information is as follows. 1. The computer was carried on Eimer's books at a value of $560,000. 2. The term of the non-cancelable lease is 3 years; title will not transfer to Eimer's, and the expected residual value at the end of the lease is $410,000, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $117,590 at the beginning of each year. 4. The incremental borrowing rate for Elmer's is 5%. Elmer's is aware that Crane Finance set the annual rental to ensure a rate of return of 5% 5. The computer has a fair value of $640,000 on January 1,2025 , and an estimated economic life of 10 years. Prepare the journal entries for both the lessee and the lessor for 2025 to record the sale and leaseback agreement (For calculation purposes, use 5 decimal places as displayed in the foctor table provided and round answers to 0 decimal ploces, es. 5,275. List all debit entries before credit entries. Credit occount 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 Ofor the amounts. Record loumal entries in the order presented in the problem.) Click here to view factor tables. Elmer'sRottaureats (Cested) (To record sale of equipment) (To record the lease) (To record lease payment) Crane Finance Co (tessor) (To record purchase of equipment) (To record the leaseback) (To record the recognition of the revenue) (To record depreciation expense on the leased equipment)
