Pharoah Corporation, which uses ASPE, manufactures replicators. On May 29, 2023, it leased to Bonita Limited a replicator that cost $266,600 to manufacture and usually sells for $415,000. The lease agreement covers the replicator's 7-year useful life and requires 7 equal annual rentals of $77,545 each, beginning May 29, 2023. The equipment reverts to Pharoah at the end of the lease, at which time it is expected that the replicator will have a residual value of $41,200, which has been guaranteed by Bonita, the lessee. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare Pharoah's May 29, 2023 journal entries. (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 O decimal places, e.g. 5,275.)
Pharoah Corporation, which uses ASPE, manufactures replicators. On May 29, 2023, it leased to Bonita Limited a replicator that cost $266,600 to manufacture and usually sells for $415,000. The lease agreement covers the replicator's 7-year useful life and requires 7 equal annual rentals of $77,545 each, beginning May 29, 2023. The equipment reverts to Pharoah at the end of the lease, at which time it is expected that the replicator will have a residual value of $41,200, which has been guaranteed by Bonita, the lessee. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare Pharoah's May 29, 2023 journal entries. (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 O decimal places, e.g. 5,275.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Manji
Transcribed Image Text:Pharoah Corporation, which uses ASPE, manufactures replicators. On May 29, 2023, it leased to Bonita Limited a replicator that cost
$266,600 to manufacture and usually sells for $415,000. The lease agreement covers the replicator's 7-year useful life and requires 7
equal annual rentals of $77,545 each, beginning May 29, 2023. The equipment reverts to Pharoah at the end of the lease, at which
time it is expected that the replicator will have a residual value of $41,200, which has been guaranteed by Bonita, the lessee. An
interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important
uncertainties concerning costs.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
Prepare Pharoah's May 29, 2023 journal entries. (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 O decimal places, e.g. 5,275.)
Date Account Titles and Explanation
May 29
Lease Receivable
Sales Revenue
Unearned Interest Income
Debit
77545
Credit
415000
245442
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