Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Crane Corporation manufactures specialty equipment with an estimated economic tife of 12 years and leases it to Provincial Airlines Corp. for a period of 10

image text in transcribed
image text in transcribed
image text in transcribed
Crane Corporation manufactures specialty equipment with an estimated economic tife of 12 years and leases it to Provincial Airlines Corp. for a period of 10 years. Both Crane and Provincial Airlines follow ASPE. The equipment's normal selling price is $210,482 and its unguaranteed residual value at the end of the lease term is estimated to be $17.000. Provincial Airlines will make annual payments of $26,600 at the beginning of each year and pay for all maintenance and insurance Crane incurred costs of $105,000 in manufacturing the equipment and $7,000 in negotiating and closing the lease. Crane has determined that the collectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%. Provincial Airlines Corp. has an incremental borrowing rate of 8%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE Prepare the entries in part (f) again, assuming a residual value at the end of the lease term of $45,000 and a purchase option of $17,000. (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 o for the amounts. Round factor values to 5 decimal places, eg. 1.25124 and final answers to decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit Beginning of the Year Equipment under Lease Obligations under Lease Cash (To record inception of lease and first lease payment.) End of the Year Interest Expense Obligations under Lease (To record interest.) Depreciation Expense Accumulated Depreciation Leased Equipment (To record depreciation expense.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Performance Auditing Of Public Sector Property Contracts

Authors: Lori Keating

1st Edition

0566089998, 978-0566089992

More Books

Students also viewed these Accounting questions

Question

Identify and control your anxieties

Answered: 1 week ago

Question

Understanding and Addressing Anxiety

Answered: 1 week ago