Crane Corporation, which uses ASPE, enters into a 3-year lease of equipment on S
ID: 2552268 • Letter: C
Question
Crane Corporation, which uses ASPE, enters into a 3-year lease of equipment on September 13, 2017 that requires 3 annual payments of $35,200 each, beginning September 13, 2017. In addition, Crane guarantees the lessor a residual value of $24,300 at lease end. The equipment has a useful life of 3 years. Assume that for Oriole Corporation, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the equipment's carrying amount is $98,000. (Use tables below, a financial calculator, or Excel functions.)
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Prepare Oriole’s September 13, 2017 journal entries assuming an interest rate of 7%.
(To record inception of lease)
(To record cost of equipment sold)
(To record receipt of first lease payment)
(To record inception of lease)
(To record cost of equipment sold)
(To record receipt of first lease payment)
Explanation / Answer
Journal Entry
Particular Debit Credit 13/09/2017 Lease Receivable Dr. 98000 To Equipment 98000 (BEing Record inception of lease) Cash Dr. 35200 To Lease receivable 35200 (Being record first lease payment)