CullumberInc. leased a new crane to Riverbed Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $46,000 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $230,000, and a cost to Cullumber of $230,000. The estimated fair value of the crane is expected to be $45,000 (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 Cullumber and Riverbed adjust and close books annually at December 31. Collectibility of the lease payments is probable. Riverbeds incremental borrowing rate is 7%, and Cullumbers implicit interest rate of 7% is known to Riverbed.

Your answer is correct. Identify the type of lease involved and give reasons for your classification. The lease is classified as an Toperating lease Your answer is partially correct. Try again. Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Riverbed uses straight-line amortization for all similar leased assets, and Cullumber depreciates the asset on a straight-line basis with a salvage value of $14,000. (Credit account titles are automatically indented when 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 present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date Debit Credit Account Titles and Explanation Lessee's Entries X 1/1/20 Trent expense ||46000 cash 146000 (To record lease.) 1/1/20 TNO Entry 10 INo Entry (To record lease payment.) 12/31/20 No Entry No Entry No Entry (To record interest and amortization expense.) Lessor's Entries 1/1/2017 Cash 146000 PrePaid Rent 146000 (To record the receipt of payment.) 12/31/20 Depreciation Expense 130857 730857 TAccumulated Depreciation-Leased Equipment (To record depreciation.) 12/31/20 08 Prepaid Rent 46000) Rent Income 746000) (To record lease revenue.)