Pharoah Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,296 at the beginning of each year. The first payment is received on January 1, 2020. Pharoah had purchased the machine during 2016 for $116,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease. Compute the amount of the lease receivable Prepare all necessary journal entries for Pharoah for 2020. Suppose the collectibility of the lease payments was not probable for Pharoah. Prepare the necessary journal entry for the company in 2020. Suppose at the end of the lease term, Pharoah receives the asset and determines that it actually has a fair value of $1,170instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Pharoah at the end of the lease term.
Pharoah Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,296 at the beginning of each year. The first payment is received on January 1, 2020. Pharoah had purchased the machine during 2016 for $116,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease. Compute the amount of the lease receivable Prepare all necessary journal entries for Pharoah for 2020. Suppose the collectibility of the lease payments was not probable for Pharoah. Prepare the necessary journal entry for the company in 2020. Suppose at the end of the lease term, Pharoah receives the asset and determines that it actually has a fair value of $1,170instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Pharoah at the end of the lease term.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pharoah Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,296 at the beginning of each year. The first payment is received on January 1, 2020. Pharoah had purchased the machine during 2016 for $116,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 6% rate of return . The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease.
Compute the amount of the lease receivable
Prepare all necessary journal entries for Pharoah for 2020.
Suppose the collectibility of the lease payments was not probable for Pharoah. Prepare the necessary journal entry for the company in 2020.
Suppose at the end of the lease term, Pharoah receives the asset and determines that it actually has a fair value of $1,170instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Pharoah at the end of the lease term.
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