What amount of Lease Receivable does Larry Leasing record

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Problem - Giamartino, Inc. (lessee) and Larry's Leasing (lessor) want to enter into a 7-year, non-cancelable lease for a crane. The lease would require 7 annual payments paid at the beginning of each year. The fair value of the crane today is $5,000,000 and at the end of year 7, Larry's Leasing, Inc. expects the residual value to be $400,000. Larry's implicit rate is 6% and Giamartino's rate is 8%. The economic useful life of the crane is 9 years. There are no significant uncertainties surrounding the collectability of lease payments or costs to provide the leased item under the anticipated lease agreement.

What amount of Lease Receivable does Larry's Leasing record in each of the three different scenarios?

Reference no: EM132666709

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