Blue Corporation entered into a lease agreement on January 1, 2020, to provide Crane Company with a piece of machinery. The terms of the lease agreement were as follows. 1 2 3 The lease is to be for 3 years with rental payments of $15,990 to be made at the beginning of each year. The machinery has a fair value of $63,000, a book value of $40,000, and an economic life of 8 years. At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed. The lease does not transfer ownership at the end of the lease term does not have a bargain purchase option, and the asset is not of a specialized nature. The implicitrate is 5%, which is known by Crane. Collectibility of the payments is probable. 4 5. 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 operating lease and for the lessor, it isa operating lease Prepare the amortization schedules Crane will use over the lease term. CRANE COMPANY Lease Amortization Schedule Annuity-Due Basis Interest Reduction of on Liability Lease Liability Annual Payment Lease Liability 45722 15990 0 $ 15990 29732 15990 1487 14503 15229 15990 761 15229 0 Lease Expense Schedule (A) Straight-Line Expense (B) Interest on Lease Liability (C) Amortization of Right-of-Use Asset (and Liability) (A-B) Carrying Value of Right-of-Use Asset 45722 15990 $ 1482 $ 14503 31219 15990 761 15229 15990 a 15990 15990 Prepare the 2020 journal entries for Crane. (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. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1 Right-of-Use Asset 45722 Lease Liability 45722 (To record lease) Jan. 1 Lease ability 15990 LITTLE Cash 15990 (To record first lease payment) 15990 Dec. 31 Lease Expense Lease Liability 1487 Right-of-Use Asset 14503 (To record lease expense and amortization) Prepare the 2020 journal entries for Blue. (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. 58,971.) Debit Credit Date Account Titles and Explanation Jan. 1 (To record lease payments) Dec. 31 II II (To record lease revenue) Dec. 31 (To record depreciation) Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Crane would need, assuming it elects to use the short-term lease option. (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. 58,971.) Debit Credit Date Account Titles and Explanation Jan. 1