You are a senior auditor auditing the December 31, 2023 financial statements of Pharoah Inc., a manufacturer of novelties and party favours and a user of ASPE. During your inspection of the company garage, you discovered that a 2022 automobile is parked in the company garage but is not listed in the equipment subsidiary ledger. You ask the plant manager about the vehicle, and she tells you that the company did not list the automobile because the company is only leasing it. The lease agreement was entered into on January 1, 2023, with Quick Deal New and Used Cars. You decide to review the lease agreement to ensure that the lease should be given operating lease treatment, and you discover the following lease terms: 1. 2. 3. 4. 5. It has a non-cancellable term of 50 months. The rental is $250 per month at the end of each month. (The PV at 1% per month is $9,799.) The estimated residual value after 50 months is $2,400. (The PV at 1% per month is $1,459.) Pharoah guarantees the residual value of $2,400. The automobile's estimated economic life is 60 months. Pharoah's incremental borrowing rate is 12% per year (1% per month).