Crane Company leases a building to Larkspur, Inc. on January 1, 2020. The following facts pertain to the lease agreement.

1.		The lease term is 6 years, with equal annual rental payments of $6,304 at the beginning of each year.
2.		Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.
3.		The building has a fair value of $35,000, a book value to Crane of $28,000, and a useful life of 7 years.
4.		At the end of the lease term, Crane and Larkspur expect there to be an unguaranteed residual value of $7,000.
5.		Crane wants to earn a return of 9% on the lease, and collectibility of the payments is probable. Larkspur was unaware of the implicit rate used in the lease by Crane and has an incremental borrowing rate of 10%.

Click here to view factor tables. How would Crane (lessor) and Larkspur (lessee) classify this lease?

Crane would classify the lease as a operating sales-type finance lease.

Larkspur would classify the lease as a sales-type finance operating lease.

How would Crane initially measure the lease receivable, and how would Larkspur initially measure the lease liability and right-of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.)

		Crane
Lease receivable		$
Present value of lease pay		$

		Larkspur
Lease Liability/Right-of-Use Asset		$