Question

Crane Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $29,017 at the beginning of each year. The first payment is received on January 1, 2020. Crane had purchased the machine during 2016 for $119,000. Collectibility of lease payments by Crane is probable. Crane set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Crane at the termination of the lease. Click here to view factor tables.

Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $enter a dollar amount of the lease receivable rounded to 0 decimal places

Prepare all necessary journal entries for Crane for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title to record the lease on January 1 enter a debit amount enter a credit amount enter an account title to record the lease on January 1 enter a debit amount enter a credit amount enter an account title to record the lease on January 1 enter a debit amount enter a credit amount enter an account title to record the lease on January 1 enter a debit amount enter a credit amount (To record the lease) enter an account title to record the first lease payment on January 1 enter a debit amount enter a credit amount enter an account title to record the first lease payment on January 1 enter a debit amount enter a credit amount (To record the first lease payment) 12/31/20 enter an account title for the journal entry on December 31 enter a debit amount enter a credit amount enter an account title for the journal entry on December 31 enter a debit amount enter a credit amount

Suppose the collectibility of the lease payments was not probable for Crane. Prepare the necessary journal entry for the company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount

Suppose at the end of the lease term, Crane receives the asset and determines that it actually has a fair value of $1,310 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Crane at the end of the lease term. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount

Answer 1

Above question is about lease . Refer to the below images for the above asked questions, in a detailed way of solution with explanation.

is @ a computation of the amount of the tease receivable. Reasurement Given Annual payments Rate of return lease period = $29017 =64. 8 years Amount of lease receivable = $29017 X 6058238* = $ 191001 present value of an annuity due of I for at 8 periods 6% 6: prepare all necessary journal entries for crane for 2020 Requivergent 77510), Because the the lease is lease term test is met classified as a sales (8/10 = 80% type lease- Debit credit particolars Date 1420 191001 51 119000 Lease Receivable All or Cost of goods sold Atc Dr To sales Revenue Alc To Inventory Alc ( Being to record the lease) (191001 $119000 $29017 fil20 cash To (Bring $29017 Atc or lease Receivable Ale to record the first lease payment) Lease 99719 10/31/20 Receivable ale or To interest Revenue 89719 workning: * [( 9191001 -$ 29014) X 0.06] =$9719

③ : Suppose the not probable entry for the collectibility of the lease for evane prepare company in 2020. payments was the necessary journal Requirement If the collectibility of lease payments is not probable for the lessor, the lessor does not derecognize the asset (on recognize the selling profit on the lease. Instead, (rane would recognize any cash receipts as a deposit liability $29017 Cash Alo Deposit To liability Alc $ 29017 A ressor selling does not profit until de recognize the asset and recognize collectibility becomes probable. Requipement Suppose at the end of the lease term crane receives the asset and determines that it actually has a fair value of $ 1310 instead of the anticipated residual value of 80. Record the entry to recognize the receipt of the asset for crane at the end of the lease term. particolars Debit Credit Answer: $ 1310 Inventory go All Gain or on lease al (Residual value) $ 1310