Question

Crane Corp. is a manufacturer of truck trailers. On January 1, 2021, Crane Corp. leases 10 trailers to Bramble Company under a 5-year noncancelable lease agreement. The following information about the lease and the trailers is provided:

1.		Equal annual payments that are due on January 1 each year provide Crane Corp. with an 9% return on net investment.
2.		Titles to the trailers pass to Bramble at the end of the lease.
3.		The fair value of each trailer is $51,800. The cost of each trailer to Crane Corp. is $47,400. Each trailer has an expected useful life of nine years.
4.		Collectibility of the lease payments is probable.

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What type of lease is this for the lessor?

                                                                      Direct-financing type leaseSales-type lease

  

  

Calculate the annual lease payment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.)

Annual lease payment

$

  

  

Prepare a lease amortization schedule for Crane Corp. for the first three years. (Round answers to 0 decimal places e.g. 5,275.)

Crane Corp. Lease Amortization Schedule (Lessor)
Date		Annual Lease Rental		Interest on Lease Receivable		Lease Receivable Recovery		Lease Receivable
1/1/21								$
1/1/21		$		$		$
1/1/22
1/1/23

  

  

Prepare the journal entries for the lessor for 2021 to record the lease agreement, the receipt of the lease rentals, and the recognition of revenue. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2021December 31, 2021
	(To record the lease)
January 1, 2021December 31, 2021
	(To record receipt of the first lease payments)
January 1, 2021December 31, 2021

Answer 1

1. this is direct financing type lease.because it is non cancellable lease

2.annual lease payment =47400/5=9480

=47400*9%=4266

ANNUAL LEASE PAYMENT = 13746

3.

date	opening balance	annual lease rent	interset recievable(9%)	closing balance
1/1/21	51800	(9480)	3809	46129
1/1/22	46129	(9480)	3298	39947
1/1/23	39947	(9480)	2742	33209

4.

date	account title & explanation	debit	credit
jan.1.21-dec.31.21	lease receivable	$47400
	asset		$47400
	(to record the lease )
jan.1.21-dec.31.21	cash	$9480
	lease receivable		$8627(9480-853)
	finance income		$853(9480*9%)
	(to record receipt of the first lease payment)