Problem 21-3 PLEASE HELP ME WITH QUESTION MARKS
Nash Industries and Crane Inc. enter into an agreement that requires Crane Inc. to build three diesel-electric engines to Nashs specifications. Upon completion of the engines, Nash has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $389,836 each January 1, starting January 1, 2017.
10	years	$ 389,836	annual Pymts
Nashs incremental borrowing rate is 10%. The implicit interest rate used by Crane Inc. and known to Nash is 9%. The total cost of building the three engines is $2,358,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Nash depreciates similar equipment on a straight-line basis. At the end of the lease, Nash assumes title to the engines. Collectibility of the lease payments is reasonably certai
Borrowing rate	10%	Interest Rate	9%	Cost	$ 2,358,000
(b) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Nash Industries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
Present Value of Min Lease Pymt				$ 389,836	x	??	=	$ ?
Date	Account Titles and Explanation							Debit	Credit
1/1/2017	Leased Assets							$ ?
	Lease Liablity								$ ?
(c) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Crane Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.)
Date	Account Titles and Explanation							Debit	Credit
1/1/2017	Lease Receivable							$ ?
	Cost of Goods Sold							$ 2,358,000
	Sales								$ ?
	Inventory								$ 2,358,000
(d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation Lessee (January 1, 2017)							Debit	Credit
Lease Liability							$ 389,836
Cash								$ 389,836
Account Titles and Explanation Lesser (January 1, 2017)							Debit	Credit
Cash							$ 389,836
Lease Receivable								$ 389,836
(e) Prepare the journal entries for both the lessee and lessor to record interest expense (revenue) at December 31, 2017. (Prepare a lease amortization schedule for 2 years.)
		$ ?	x	9%	=	$ ?
		$ ?	x	9%	=	$ ?
NASH INDUSTRIES
Lease Amortization Schedule
Date	Annual Lease		Interest on		Reduction in		Lease
	Receipt/Payment		Receivable/Liability		Receivable/Liability		Receivable/ Liability
1/1/2017	$ -		$ -		$ -		$ ??
1/1/2017	$389,836		$ ??		$ 389,836		$ ??
1/1/2018	$389,836		$ ??		$ ??		$ ??
1/1/2019	$389,836
Account Titles and Explanation Lessee (January 1, 2017)							Debit	Credit
Interest							$ ??
Interest Payable								$ ??
Account Titles and Explanation Lesser (January 1, 2017)							Debit	Credit
Interest Receivable							$ ??
Interest								$ ??
(f) Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2017, for both the lessee and the lessor.
NASH INDUSTRIES
Lease Amortization Schedule
12/31/2017
Assets
??Title??:
Leased Equipment							$ ??
less	Accumulated Depreciation						$ ??
							$ ??
Current Liabiltiy
Short-Term Liabilites
Interest Payable							$ ??
Lease Liability							$ ??
Long-Term Liability
Lease Liability							$ ??
Crane Inc.
Balance Sheet
Assets
Current Assets
Interest Receivable							$ ??
Lease Receivable							$ ??
Long-Term Assets
Lease Receivable							$ ??