On January 1, 2020, Crane Ltd. entered into an agreement to lease a truck from Pina...

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On January 1, 2020, Crane Ltd. entered into an agreement to lease a truck from Pina Colada Ltd. Both Crane and Pina Colada use IFRS 16. The details of the agreement are as follows: Carrying value of truck for Pina Colada Ltd. Fair value of truck Economic life of truck Lease term Rental payments (at beginning of each month) Executory costs included in rental payments each month for insurance Incremental borrowing rate for Crane Ltd. $21,557 $21,557 5 years 3 years $650 $22 12% Crane Ltd. expects to pay Pina Colada Ltd. $3,520 under a residual value guarantee for the truck. Additional information: 1. There are no abnormal risks associated with the collection of lease payments from Crane. 2. There are no additional unreimbursable costs to be incurred by Pina Colada in connection with the leased truck. 3. At the end of the lease term, Pina Colada sold the truck to a third party for $3,205, which was the truck's fair value at December 31, 2022. Crane paid Pina Colada the difference between the guaranteed residual value of $3,520 and the proceeds obtained on the resale. Crane knows the interest rate that is implicit in the lease. 4. 5. Crane knows the amount of executory costs included in the minimum lease payments. 6. Crane uses straight-line depreciation for its trucks with the residual value guarantee of $3,520 for the leased truck. 6 Prepare the journal entries that Pina Colada would make on January 1, 2020, and the adjusting journal entries at December 31, 2020, to record the annual interest income from the lease arrangement, assuming that Pina Colada has a December 31 fiscal year end. (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 answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Jan. 1, 2020 Dec. 31, 2020 (To record interest.) Debit Credit On January 1, 2020, Crane Ltd. entered into an agreement to lease a truck from Pina Colada Ltd. Both Crane and Pina Colada use IFRS 16. The details of the agreement are as follows: Carrying value of truck for Pina Colada Ltd. Fair value of truck Economic life of truck Lease term Rental payments (at beginning of each month) Executory costs included in rental payments each month for insurance Incremental borrowing rate for Crane Ltd. $21,557 $21,557 5 years 3 years $650 $22 12% Crane Ltd. expects to pay Pina Colada Ltd. $3,520 under a residual value guarantee for the truck. Additional information: 1. There are no abnormal risks associated with the collection of lease payments from Crane. 2. There are no additional unreimbursable costs to be incurred by Pina Colada in connection with the leased truck. 3. At the end of the lease term, Pina Colada sold the truck to a third party for $3,205, which was the truck's fair value at December 31, 2022. Crane paid Pina Colada the difference between the guaranteed residual value of $3,520 and the proceeds obtained on the resale. Crane knows the interest rate that is implicit in the lease. 4. 5. Crane knows the amount of executory costs included in the minimum lease payments. 6. Crane uses straight-line depreciation for its trucks with the residual value guarantee of $3,520 for the leased truck. 6 Prepare the journal entries that Pina Colada would make on January 1, 2020, and the adjusting journal entries at December 31, 2020, to record the annual interest income from the lease arrangement, assuming that Pina Colada has a December 31 fiscal year end. (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 answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Jan. 1, 2020 Dec. 31, 2020 (To record interest.) Debit Credit