On January 1, 2017 Crane Leasing Company leases computer hardware to Watson Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Watson Company has the option to purchase the hardware for $8,000 upon termination of the lease.
2. The equipment has a cost and fair value of $103,000 to Crane Leasing Company. The useful economic life is 2 years, with a salvage value of $8,000.
3. Crane Leasing Company desires to earn a return of 11% on its investment.
4. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.
Prepare the journal entries on the books of Crane Leasing to reflect the payments received under the lease and to recognize income for the years 2017 and 2018. (Round present value factor calculations to 5 decimal places, e. g. 1.25124 and the final answer to decimal places e. g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)