The lease term is $6$ years, with equal annual rental payments of $$3,292$ at the beginning of each year.

Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.

The building has a fair value of $$18,900,$ a book value to Crane of $$7,560,$ and a useful life of $7$ years.

At the end of the lease term, Crane and Blossom expect there to be an unguaranteed residual value of $$3,910.$

Crane wants to earn a return of $8\%$ on the lease, and collectibility of the payments is probable. This rate is known by Blossom.

Click here to view factor tables.

$($b$)$ Using the original facts of the lease, show the journal entries to be made by both Crane and Blossom in $2025.($List all debit entries before credit entries. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places, e$.$g$.5,275.$ Credit account titles are automatically indented when the amount is entered. Do not indent manually.$)$

Crane's Journal Entries

Date

Account Titles and Explanation

Debit

Credit

Lease Receivable

Cost of Goods Sold

Sales Revenue

$($To record the lease$)$