On January 1, 2020, Larkspur Co. leased a building to Crane Inc. The relevant information related to
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On January 1, 2020, Larkspur Co. leased a building to Crane Inc. The relevant information related to the lease is as follows.
1. | The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,700,000 (unguaranteed). | |
2. | The leased building has a cost of $4,200,000 and was purchased for cash on January 1, 2020. | |
3. | The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. | |
4. | Lease payments are $275,000 per year and are made at the beginning of the year. | |
5. | Crane has an incremental borrowing rate of 5%, and the rate implicit in the lease is unknown to Crane. | |
6. | Both the lessor and the lessee are on a calendar-year basis. |
Prepare the journal entries that Crane should make in 2020
Related Book For
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel
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