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On January 1, 2020, Larkspur Co. leased a building to Crane Inc. The relevant information...

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Accounting

On January 1, 2020, Larkspur Co. leased a building to Crane Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $ 3,400,000 (unguaranteed). 2. The leased building has a cost of $ 3,900,000 and was purchased for cash on January 1, 2020. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $ 250,000 per year and are made at the beginning of the year. 5. Crane has an incremental borrowing rate of 6%, and the rate implicit in the lease is unknown to Crane. 6. Both the lessor and the lessee are on a calendar-year basis.

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Prepare the journal entries that Crane should make in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment)

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