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Crane plc leases a building to Walsh Ltd on January The following facts pertain to the lease agreement.
The lease term is years, with equal annual rental payments of at the beginning of each year.
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.
The building has a fair value of a book value to Crane of and a useful life of years.
At the end of the lease term, Crane and Walsh expect there to be an unguaranteed residual value of
Crane wants to earn a return of on the lease, and collectibility of the payments is probable. This rate is known by Walsh.
