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Blue Corporation entered into a lease agreement on January 1, 2020, to provide Crane Company with a piece of machinery. The terms of the lease agreement were as follows.

1.		The lease is to be for 3 years with rental payments of $15,180 to be made at the beginning of each year.
2.		The machinery has a fair value of $64,000, a book value of $40,000, and an economic life of 8 years.
3.		At the end of the lease term, both parties expect the machinery to have a residual value of $25,000, none of which is guaranteed.
4.		The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature.
5.		The implicit rate is 6%, which is known by Dawkins.
6.		Collectibility of the payments is probable.

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Evaluate the criteria for classification of the lease, and describe the nature of the lease. For the lessee, it is a operating leasesales-type leasefinance lease, and for the lessor, it is a sales-type leaseoperating leasefinance lease.

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List of Accounts

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Prepare the amortization schedules Crane will use over the lease term.

CRANE COMPANY Lease Amortization Schedule Annuity-Due Basis
Date		Annual Payment		Interest on Liability		Reduction of Lease Liability		Lease Liability
1/1/20								$
1/1/20		$		$		$
1/1/21
1/1/22

Lease Expense Schedule

Date

(A) Straight-Line Expense

(B) Interest on Lease Liability

(C) Amortization of Right-of-Use Asset (and Liability) (A-B)

Carrying Value of Right-of-Use Asset

1/1/20

$

12/31/20

$

$

$

12/31/21

12/31/22

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List of Accounts

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Prepare the 2020 journal entries for Crane. (Credit account titles are automatically indented when the 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.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1
	(To record lease)
Jan. 1
	(To record first lease payment)
Dec. 31
	(To record lease expense and amortization)

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