Question: Blossom Corporation, which uses ASPE, leased equipment it had specifically purchased at a cost of $175,200 for Crane, the lessee. The term of the lease

Blossom Corporation, which uses ASPE, leased equipment it had specifically purchased at a cost of $175,200 for Crane, the lessee. The term of the lease is 6 years, beginning January 1, 2020, with equal rental payments of $35,831 at the beginning of each year. Crane pays all executory costs directly to third parties. The equipment's fair value at the lease's inception is $175,200. The equipment has a useful life of 7 years with no residual value. The lease has an implicit interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility is reasonably assured, with no additional costs to be incurred by Blossom.

Using tables, a financial calculator, or Excel functions, calculate the present value of the lease payments and prepare Crane Corporation’s January 1, 2017 journal entries at the inception of the lease.

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