On January 1, 2020, Crane Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.

1.		The agreement requires equal rental payments of $69,718 beginning on January 1, 2020.
2.		The lathes fair value on January 1, 2020, is $470,000.
3.		The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $18,000. Crane Corp. depreciates similar equipment using the straight-line method.
4.		The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.
5.		Cranes incremental borrowing rate is 9% per year. The lessors implicit rate is not known by Crane Corp.
6.		The yearly rental payment includes $2,529.52 of executory costs related to insurance on the lathe.

Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

(a)

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Your answer is partially correct.

Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement. (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 0 for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.25.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
	enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
	enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
	enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount

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List of Accounts

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(b)

Prepare an amortization schedule for the term of the lease to be used by Crane. Use Excel. (Round answers to 2 decimal places, e.g. 5,275.25.)

CRANE CORP. Lease Amortization Schedule (Lessee)
Date		Annual Payment Excluding Executory Costs		Interest on Unpaid Obligation		Reduction of Lease Obligation		Balance of Lease Obligation
								$enter a dollar amount
Jan. 1, 2020		$enter a dollar amount enter a dollar amount				$enter a dollar amount enter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2021		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2022		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2023		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2024		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2025		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2026		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2027		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2028		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
Jan. 1, 2029		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount		enter a dollar amountenter a dollar amount
		$enter a total amount enter a total amount		$enter a total amount enter a total amount		$enter a total amount enter a total amount