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Crane plc leased machinery from Young Ltd. on January 1, 2022. The lease term was...

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Accounting

Crane plc leased machinery from Young Ltd. on January 1, 2022. The lease term was for 8 years, with equal annual rental payments of 5,800 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for 1,500, which Crane is reasonably certain it will exercise, as it believes the fair value of the machinery will be at least 6,000. The machinery has a useful life of 10 years and a fair value of 38,000. The implicit rate of the lease is not known to Crane. Cranes incremental borrowing rate is 9%.

Prepare Cranes 2022 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)

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