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Crane Leasing Company agrees to lease equipment to Cheyenne Corporation on January 1, 2020. The following information relates to the lease agreement 1 2. 3. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $518,000, and the fair value of the asset on January 1, 2020, is $648,000 At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Cheyenne estimates that the expected residual value at the end of the lease term will be 50,000 Cheyenne amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020 The collectibility of the lease payments is probable. Crane desires a 11% rate of return on its investments. Cheyenne's incremental borrowing rate is 12%, and the lessor's implicit rate is unknown 4. 5. 6. (Assume the accounting period ends on December 31.) Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, c.g. 1.25124 and the final answer to decimal places eg. 58,972.) Annual rental payment $ 119283 Your answer is correct. Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to decimal places eg. 58,972.) Present value of minimum lease payments 609704 e Textbook and Media Prepare the journal entries Cheyenne would make in 2020 and 2021 related to the lease arrangement. (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 for the amounts. Round answers to O decimal places eg. 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Right-of-Use Asset 648000 Lease Liability 8480 (To record the lease.) Lease Liability 119283 Cash 1192 (To record lease payment.) 12/31/20 Amortization Expense 58159 Right-of-Use Asset 581 (To record amortization.) (To record amortization.) Interest Expense Lease Liability (To record interest.) 1/1/21 Lease Liability Cash 12/31/21 Amortization Expense Right-of-Use Asset (To record amortization.) Interest Expense Lease Liability (To record interest.) Prepare the journal entries Crane would make in 2020 and 2021 related to the lease arrangement. (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 for the amounts. Round answers to decimal places eg, 58,972. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/20 Lease Recevable 648000 Cost of Goods Sold 518000 Sales Revenue 64 Inventory 51 (To record the lease.) 1/1/20 Cash Lease Receivable (To record lease payment.) 3122120 Las Receivable 1/1/20 Cash Lease Receivable (To record lease payment.) 12/31/20 Lease Receivable Interest Revenue 1/1/21 Cash Lease Recevable 12/31/21 Lease Receivable Interest Revenue (12 Suppose Cheyenne expects the residual value at the end of the lease term to be $40,000 but still guarantees a residual of $50,000. Compute the value of the lease liability at lease commencement Lease liability $