Question
Crane Inc. leased a new crane to Blue Construction under a 5-year, non-cancelable contract starting January 1, 2017. Terms of the lease require payments of
Crane Inc. leased a new crane to Blue Construction under a 5-year, non-cancelable contract starting January 1, 2017. Terms of the lease require payments of $46,500 each January 1, starting January 1, 2017. The crane has an estimated life of 7 years, a fair value of $230,000, and a cost to Crane of $230,000. The estimated fair value of the crane is expected to be $40,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Crane and Blue adjust and close books annually at December 31. Collectibility of the lease payments is probable. Blues incremental borrowing rate is 9%, and Cranes implicit interest rate of 9% is known to Blue.
CALCULATOR PRINTER VERS Lessee's Entries (To record lease.) (To record lease payment.) 12/31/17 (To record interest and amortization expense.) (To record expenses.) 12/31/17 (To record depreciation.) 12/31/17Step by Step Solution
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