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Crane Company, a machinery dealer, leased a machine to Cullumber Corporation on January 1, 2025. The lease is for an 8 -year period and requires
Crane Company, a machinery dealer, leased a machine to Cullumber Corporation on January 1, 2025. The lease is for an 8 -year period and requires equal annual payments of $25,300 at the beginning of each year. The first payment is received on January 1,2025, Crane had purchased the machine during 2024 for $150,000. Collectibility of lease payments by Crane is probable. Crane set the annual rental to ensure a 8% rate of return. The machine has an economic life of 10 years with no residual value and reverts to C rane at the. termination of the lease. Assume that Cullumber Corporation does not know the rate implicit in the lease used by Crane, and Cullumber's incremental borrowing rate is 10%, In addition, assume that Cullumber incurs initial direct costs of $18,000. Click here to view factor tables. (a) Compute the amount of the lease liability and right-of-use asset for Cullumber. (For calculation purposes, use 5 decimal places as displayed in the foctor table provided and round final answers to 0 decimal places eg. 5,275.) Lease liability Right-of-use asset
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