Question 5 ClevelandInc. leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $48,555 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $240,000, and a cost to Cleveland of $240,000. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the end of the ease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the ease payments is probable. Abriendo's incremental borrowing rate is 8%, and Cleveland's implicit interest rate of 8% is known to Abriendo. Click here to view factor tables. (a) Your answer is correct. Identify the type of lease involved and give reasons for your classification. The lease is classified as an operating lease v SHOW SOLUTION LINK TO TEXT Attempts: 3 of 15 used Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Abriendo uses straight-line amortization for all similar leased assets, and Cleveland depreciates the asset on a straight-line basis with a salvage value of $15,000. (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. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date Debit Credit Account Titles and Explanation Lessee's Entries 1/1/201 (To record lease.) 1/1/20 T no entry X no entry (To record lease payment.) 12/31/2017 no entry no entry no entry Lessor's Entries X 1/1/20 X X (To record the receipt of payment.) 12/31/20 UU X (To record depreciation.) X 12/31/20 (To record lease revenue.) Question 5 ClevelandInc. leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $48,555 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $240,000, and a cost to Cleveland of $240,000. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the end of the ease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the ease payments is probable. Abriendo's incremental borrowing rate is 8%, and Cleveland's implicit interest rate of 8% is known to Abriendo. Click here to view factor tables. (a) Your answer is correct. Identify the type of lease involved and give reasons for your classification. The lease is classified as an operating lease v SHOW SOLUTION LINK TO TEXT Attempts: 3 of 15 used Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Abriendo uses straight-line amortization for all similar leased assets, and Cleveland depreciates the asset on a straight-line basis with a salvage value of $15,000. (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. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date Debit Credit Account Titles and Explanation Lessee's Entries 1/1/201 (To record lease.) 1/1/20 T no entry X no entry (To record lease payment.) 12/31/2017 no entry no entry no entry Lessor's Entries X 1/1/20 X X (To record the receipt of payment.) 12/31/20 UU X (To record depreciation.) X 12/31/20 (To record lease revenue.)