On January $1,2023,$ Crane Corp., which uses IFRS, signs a $10-$year, non$-$cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.

$1.$ The agreement requires equal rental payments of $$91\mathrm{.}050$ beginning on January $1,2023.$

$2.$ The lathe's fair value on January $1,2023,$ is $$600,000.$

$3$ The lathe has an estimated economic life of $12$ years, with an unguaranteed residual value of $$18,000.$ Crane depreciates similar equipment using the straight$-$line method.

$4.$ The lease is non$-$renewable. At the termination of the lease, the lathe reverts to the lessor.

$5.$ Crane$$s incremental borrowing rate is $10\%$ per year. The lessor$$s implicit rate is not known by Crane.

$6.$ The yearly rental payment includes $$2,278\mathrm{.}78$ of the executors costs related to insurance on the lathe.

Assume this is a manufacturer$/$dealer lease

Click here to view the factor table PRESENT VALUE OF $1.$

Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE OF $1.$

Assume that Crane$$s fiscal year end is May $31.$ Prepare the journal entries on Crane$$s book to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years $2023$ and $2024.$ Crane does not prepare reversing entries.

Date Account Titles and Explanation Debit Credit

$($To record depreciation expense$)$

$($To record interest expense$)$

$($To record depreciation expense$)$

$($To record expired insurance$)$