On January 1, 2017, Lavery Corp., which follows ASPE, leased equipment to Crane Ltd., which follows IFRS 16. Both Lavery and Crane have calendar year ends. The following information concerns this lease. 1. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,200. Crane Ltd. depreciates all its equipment on a straight-line basis. 2. Equal rental payments are due on January 1 of each year, beginning in 2017. 3. The equipment's fair value on January 1, 2017 is $155,000 and its cost to Lavery is $111,000. 4. The equipment has an economic life of seven years. 5. Lavery set the annual rental to ensure a 11% rate of return. Crane's incremental borrowing rate is 12% and the lessor's implicit rate is unknown to the lessee. 6. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Click here to view the factor table. Using time value of money tables, a financial calculator, or Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.) Annual rental payment $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT Prepare all necessary journal entries and adjusting entries for Crane for 2017. (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. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Right-of-Use Asset Lease Liability Cash 12/31/17 ~ Depreciation Expense Accumulated Depreciation - Right-of-Use Asset (To record depreciation) 12/31/17 Interest Expense Lease Liability (To record accrued interest) Prepare all necessary journal entries and adjusting entries for Lavery for 2017. (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. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Lease Receivable Cost of Goods Sold Sales Revenue Inventory Unearned Interest Income (To record inception of lease & cost of goods sold) 1/1/17 Cash Lease Receivable (To record receipt of lease payment) 12/31/17 Unearned Interest Income Screenshot(Alt + A) Interest Income (To record accrued interest) On January 1, 2017, Lavery Corp., which follows ASPE, leased equipment to Crane Ltd., which follows IFRS 16. Both Lavery and Crane have calendar year ends. The following information concerns this lease. 1. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,200. Crane Ltd. depreciates all its equipment on a straight-line basis. 2. Equal rental payments are due on January 1 of each year, beginning in 2017. 3. The equipment's fair value on January 1, 2017 is $155,000 and its cost to Lavery is $111,000. 4. The equipment has an economic life of seven years. 5. Lavery set the annual rental to ensure a 11% rate of return. Crane's incremental borrowing rate is 12% and the lessor's implicit rate is unknown to the lessee. 6. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Click here to view the factor table. Using time value of money tables, a financial calculator, or Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.) Annual rental payment $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT Prepare all necessary journal entries and adjusting entries for Crane for 2017. (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. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Right-of-Use Asset Lease Liability Cash 12/31/17 ~ Depreciation Expense Accumulated Depreciation - Right-of-Use Asset (To record depreciation) 12/31/17 Interest Expense Lease Liability (To record accrued interest) Prepare all necessary journal entries and adjusting entries for Lavery for 2017. (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. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Lease Receivable Cost of Goods Sold Sales Revenue Inventory Unearned Interest Income (To record inception of lease & cost of goods sold) 1/1/17 Cash Lease Receivable (To record receipt of lease payment) 12/31/17 Unearned Interest Income Screenshot(Alt + A) Interest Income (To record accrued interest)
