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

1.		The lease term is 5 years, with equal annual rental payments of $4,713 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 $22,500, a book value to Crane of $15,500, and a useful life of 6 years.
4.		At the end of the lease term, Crane and Walsh expect there to be an unguaranteed residual value of $3,875.
5.		Crane wants to earn a return of 9% on the lease, and collectibility of the payments is probable. This rate is known by Walsh.

Click here to view factor tables. (b) Using the original facts of the lease, show the journal entries to be made by both Crane and Walsh in 2020. (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. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Crane Journal Entries Date Account Titles and Explanation Debit Credit T1/1/20 Lease Receivable 22500) Cost of Goods Sold 19982 Sales Revenue 26982 15500 Inventory (To record the lease) 1/1/20 cash 4713 4713 Lease Receivable (To record lease payment) 112/31/20Lease Receivable 11601 Interest Receivable T1601 Walsh's Journal Entries Date Account Titles and Explanation Debit Credit > 17/1/20 Right-of-Use Asset 26982 31E 26982 14713 Lease Liability (To record the lease) 11/1/20 Lease Liability 7/1/20 Cash (To record lease payment) 12/31/20 12/31/20 Interest Expense 4713 2004 X 2004 Lease Liability (To record interest expense) 112/31/20 Depreciation Expense 5396 5396 Right-of-Use Asset (To record amortization of the right-of-use asset)