Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Prepare all the necessary journal entries for crane for 2020. Suppose the collectibility of the lease payments was not probable for Crane. Prepare the necessary
Prepare all the necessary journal entries for crane for 2020.
Suppose the collectibility of the lease payments was not probable for Crane. Prepare the necessary journal entry for the company in 2020
Prepare all the necessary journal entries for Flynn for 2020.
Prepare the effect on the journal entry for Flynn at lease commencement, assuming initial direct costs of $2,000 are incurred by Flynn to negotiate the lease
On January 1, 2020, Crane Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $7,000. Equal rental payments are due on January 1 of each year, beginning in 2020. 2. 3. The fair value of the equipment on January 1, 2020, is $140,000, and its cost is $100,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Crane set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started