Use the following information for Problems #6:

(Lessee Entries for Capital Lease) On January 1, 2012, Crowther Company contracts to lease equipment for 5 years, agreeing to make annual payments of $65,950 at the beginning of each year, starting January 1, 2012. The leased equipment is to be capitalized at $275,000. The asset is to be depreciated on a double-declining-balance basis. The lease will be amortized using the effective interest method. Crowthers incremental borrowing rate is 12%, and the lessors implicit rate in the lease is 10%, which is known by Crowther. Title to the equipment transfers to Crowther when the lease expires. The asset has an estimated useful life of 5 years and no residual value. (Round all numbers to the nearest dollar.)

A] Compute the present value of the minimum lease payments:

P.V. of minimum lease payments Calculations:

B]) Prepare the journal entry or entries that should be recorded on January 1, 2012, by Crowther Company (note: two JEs needed one to record the lease and the other to record the first payment correct accounts must be used):

	DR	CR
	DR	CR

C] Prepare the journal entries to record the accrual of interest at December 31^st and also to record depreciation for the year 2012 (two journals needed)

	DR	CR
	DR	CR

Note: Based on Problems P21-8