On January 1, 2023, Pharoah Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement. 1. The agreement requires equal rental payments of $69,360 beginning on January 1, 2023. 2. The lathe's fair value on January 1, 2023, is $470,000. 3. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $15,000. Pharoah depreciates similar equipment using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor. 5. Pharoah's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Pharoah. 6. The yearly rental payment includes $2,171.52 of executory costs related to insurance on the lathe. Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. Credit account titles are automatically indented when the 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. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.25.) Date Account Titles and Explanation 1/1/23 Debit Credit
On January 1, 2023, Pharoah Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement. 1. The agreement requires equal rental payments of $69,360 beginning on January 1, 2023. 2. The lathe's fair value on January 1, 2023, is $470,000. 3. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $15,000. Pharoah depreciates similar equipment using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor. 5. Pharoah's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Pharoah. 6. The yearly rental payment includes $2,171.52 of executory costs related to insurance on the lathe. Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. Credit account titles are automatically indented when the 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. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.25.) Date Account Titles and Explanation 1/1/23 Debit Credit
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
Related questions
Question
![On January 1, 2023, Pharoah Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from
Liu Inc. The following information concerns the lease agreement.
1.
The agreement requires equal rental payments of $69,360 beginning on January 1, 2023.
2.
3.
The lathe's fair value on January 1, 2023, is $470,000.
The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $15,000. Pharoah depreciates
similar equipment using the straight-line method.
4.
The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.
5.
Pharoah's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Pharoah.
6.
The yearly rental payment includes $2,171.52 of executory costs related to insurance on the lathe.
Assume this is a manufacturer/dealer lease.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
(a)
Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease
liability and prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. Credit
account titles are automatically indented when the 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. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places,
e.g. 5,275.25.)
Date Account Titles and Explanation
1/1/23
Debit
Credit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0c93df84-85bb-4df1-afdc-4fe8c87c3727%2Fe2c5a6e7-6eb7-4891-87b4-c2c3c9f055ce%2Fu265e0t_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2023, Pharoah Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from
Liu Inc. The following information concerns the lease agreement.
1.
The agreement requires equal rental payments of $69,360 beginning on January 1, 2023.
2.
3.
The lathe's fair value on January 1, 2023, is $470,000.
The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $15,000. Pharoah depreciates
similar equipment using the straight-line method.
4.
The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.
5.
Pharoah's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Pharoah.
6.
The yearly rental payment includes $2,171.52 of executory costs related to insurance on the lathe.
Assume this is a manufacturer/dealer lease.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
(a)
Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease
liability and prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. Credit
account titles are automatically indented when the 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. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places,
e.g. 5,275.25.)
Date Account Titles and Explanation
1/1/23
Debit
Credit
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning