Reference no: EM133055522
Question - Crane Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to the lease agreement.
1. The lease term is 5 years, with equal annual rental payments of $ 4,713 at the beginning of each year.
2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.
3. The building has a fair value of $ 22,500, a book value to Crane of $ 15,500, and a useful life of 6 years.
4. At the end of the lease term, Crane and Walsh expect there to be an unguaranteed residual value of $ 3,875.
5. Crane wants to earn a return of 9% on the lease, and collectibility of the payments is probable. This rate is known by Walsh.
Required - Using the original facts of the lease, show the journal entries to be made by both Crane and Walsh in 2020?
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