Assume that IBM leased equipment that was carried at a cost of $115,000 to Crane Company. The term of the lease is 6 years beginning December 31, 2019, with equal rental payments of $28,430 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $144,999. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 7%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $144,999. Required:
Prepare IBM’s December 31, 2020, entry to record the lease transaction with Crane Company.