Problem 21-2

Riverbed Inc. leased a new crane to Marin Construction under a 5-year noncancelable contract starting January 1, 2017. Terms of the lease require payments of $29,900 each January 1, starting January 1, 2017. Riverbed will pay insurance, taxes, and maintenance charges on the crane, which has an estimated life of 12 years, a fair value of $232,000, and a cost to Riverbed of $232,000. The estimated fair value of the crane is expected to be $41,200 at the end of the lease term. No bargain-purchase or -renewal options are included in the contract. Both Riverbed and Marin adjust and close books annually at December 31. Collectibility of the lease payments is reasonably certain, and no uncertainties exist relative to unreimbursable lessor costs. Marins incremental borrowing rate is 9%, and Riverbeds implicit interest rate of 8% is known to Marin. (b) Prepare all the entries related to the lease contract and leased asset for the year 2017 for the lessee and lessor, assuming the following amounts. (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 0 for the amounts.)

(1)		Insurance $480.
(2)		Property taxes $2,120.
(3)		Maintenance and repairs $680.
(4)		Straight-line depreciation and salvage value $14,500.

Account Titles and Explanation Debit Credit Lessee's Entries Lessor's Entries To record expenses.) To record depreciation.) To record revenue.)