Pharoah Corporation agrees on January 1, 2025, to lease equipment from Sheridan, Inc. for 3 years. The lease calls for annual lease payments of $15,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Sheridan, Inc., the lessor, the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $110,000. Prepare Sheridan' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem)

Pharoah Corporation agrees on January 1, 2025, to lease equipment from Sheridan, Inc. for 3 years. The lease calls for annual lease payments of $15,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Sheridan, Inc., the lessor, the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $110,000. Prepare Sheridan' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem)

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 12P: Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease...

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Do not give answer in image

(To record the recognition of the revenue each period)
(To record depreciation expense on the leased
equipment)

Pharoah Corporation agrees on January 1, 2025, to lease equipment from Sheridan, Inc. for 3 years. The lease calls for annual lease
payments of $15,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is
not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less
than 90% of the fair value of the equipment. Assume that for Sheridan, Inc., the lessor, the collectibility of the lease payments is
probable, and the fair value and cost of the equipment is $110,000.
Prepare Sheridan' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit
entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Account Titles and Explanation
Date
(To record the recognition of the revenue each period)
Debit
Credit

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