The following facts pertain to a non-cancelable lease agreement between Pharoah Leasing Company and Oriole Company, a lessee. January 1, 2025 Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term Lease term Economic life of leased equipment Fair value of asset at January 1, 2025 Lessor's implicit rate Lessee's incremental borrowing rate $128,634 $47,000 $42,000 6 years 6 years $657,000 9 % 9 % 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.
The following facts pertain to a non-cancelable lease agreement between Pharoah Leasing Company and Oriole Company, a lessee. January 1, 2025 Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term Lease term Economic life of leased equipment Fair value of asset at January 1, 2025 Lessor's implicit rate Lessee's incremental borrowing rate $128,634 $47,000 $42,000 6 years 6 years $657,000 9 % 9 % 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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hr.3
Transcribed Image Text:The following facts pertain to a non-cancelable lease agreement between Pharoah Leasing Company and Oriole Company, a lessee.
Commencement date
Annual lease payment due at the beginning of
each year, beginning with January 1, 2025
Residual value of equipment at end of lease term,
guaranteed by the lessee
Expected residual value of equipment at end of lease term
Lease term
Economic life of leased equipment
Fair value of asset at January 1, 2025
Lessor's implicit rate
Lessee's incremental borrowing rate
January 1, 2025
$128,634
$47,000
$42,000
6 years
6 years
$657,000
9%
9%
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.
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Transcribed Image Text:Date
1/1/25
1/1/25
1/1/26
1/1/27
1/1/28
1/1/29
1/1/30
12/31/30
$
VA
Annual Lease
Payment Plus GRV
LA
tA
ORIOLE COMPANY (Lessee)
Lease Amortization Schedule
Interest on
Liability
VA
Reduction of Lease
Liability
Lease Liability
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