The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee.Commencement dateJanuary 1,Annual lease payment due at the beginning ofeach year, beginning with January 1,$116,406Residual value of equipment at end of lease term,guaranteed by the lessee$5000Expected residual value of equipment at end of lease term$45,0006 years6 yearsLease termEconomic life of leased equipmentFair value of asset at January 1,$642,000Lessor's implicit rate6 %Lessee's incremental borrowing rate6 %The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leasedequipment.Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculationsto 5 decimal places, eg 1.25124 and the final answers to O decimal places eg. 5,275.)PHAROAH COMPANY (Lessee)Lease Amortization ScheduleAnnual LeasePayment Plus GRVInterest onLiabilityReduction of LeaseLiabilityLease Liability Prepare all of the journal entries for the lessee for and to record the lease agreement, the lease payments, and all expensesrelated to this lease. Assume the lessee's annual accounting period ends on December 31 (Credit account titles are automaticallyindented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O forthe amounts. Round answers to O decimal places eg. 5,275. Record journal entries in the order presented in the problem.)DateAccount Titles and ExplanationDebitCredit(To record the lease.)(To record first lease payment.)(To record interest.)(To record amortization.)(To record second lease payment.)(To record interest.)(To record amortization.)Suppose Pharoah received a lease incentive of $5.000 from Faldo Leasing to enter the lease. Howwould the initialmeasurement of the lease liability and right-of-use asset be affected?Right-of-use assetLease LiabilityWhat if Pharoah prepaid rent of $5,0o00 to Faldo?Right-of-use assetLease Liability24%24>

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The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $116,406 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term $50,000 $45,000 6 years 6 years S642,000 Lease term Economic life of leased equipment Fair value of asset at January 1, Lessor's implicit rate Lessee's incremental borrowing rate 6 % 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places eg. 5,275.)

The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $116,406 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term $50,000 $45,000 6 years 6 years S642,000 Lease term Economic life of leased equipment Fair value of asset at January 1, Lessor's implicit rate Lessee's incremental borrowing rate 6 % 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places eg. 5,275.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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