a The following facts pertain to a non-cancelable lease agreement between Pharoah Leasing Company and Shamrock Company, a lessee. Commencement date June 1, 2020 Annual lease payment beginning with June 1, 2020 $46,919.69 Bargain purchase option price at end of lease term $12,200 Lease term 4 years Economic life of leased equipment (no salvage value) 12 years Lessor's cost $162,000 Fair value of asset at June 1, 2020 $181,999.99 Lessor's implicit rate (known to lessee) 6 % Lessee's incremental borrowing rate 6 % The collectibility of the lease payments by Pharoah is probable. The collectibility of the lease payments by Pharoah is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. Discuss the nature of this lease to Shamrock. The nature of this lease to Shamrock is a finance lease. Prepare a lease amortization schedule for Shamrock for the 4-year lease term. (Round answers to 2 decimal places, eg. 5,275.15.) IF SHAMROCK COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability Date *t 6/1/20 $ $ inde $ i $ . 6/1/20 46919.69 i 46919.69 6/1/21 46919.69 8104.82 38814.87 6/1/22 46919.69 5775.93 41143.76 6/1/23 46919.69 3807.30 43612.39 5/31/24 12200 690.56 11509.44 ual Lease Payment Plus Interest on Liability Reduction of Lease Liability Lease Liability i or $ 181999.99 46919.69 46919.69 135080.3 46919.69 8104.82 38814.87 96265.43 46919.69 5775.93 41143.76 55121.67 46919.69 3307.30 43612.39 1150928 12200 690.56 11509.44 -0.16 199878.76 $ 17878.61 $ 182000.15 Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Shamrock's annual accounting period ends on December 31. Reversing entries are used by Shamrock. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, eg. 5,275.15. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 6/1/20 Right-of-Use Asset 181999.99 Lease Liability 181 (To record the lease) 6/1/20 Lease Liability 46919.69 Cash 46 (To record the first lease payment) 12/31/20 Interest Expense 4727.81 12/31/20 Interest Expense 4727.81 4 Lease Liability (To record interest expense) 12/31/20 Amortization Expense 15166.67 15 Right-of-Use Asset (To record amortization of the right-of-use asset) 1/1/21 4727.81 Lease Liability > Interest Expense (Reversing entry) 6/1/21 Lease Liability 43542.68 Question 2 4727.81 11/21 Lease Liability Interest Expense (Reversing entry) 43542.68 6/1/21 Lease Liability 3377.01 Interest Expense 46 Cash 3369.30 12/31/21 Interest Expense 3 Lease Liability (To record interest expense) 15166.67 46 Cash 12/31/21 Interest Expense 3369.30 3 Lease Liability (To record interest expense) 12/31/21 Amortization Expense 15166.67 Right-of-Use Asset 15 (To record amortization of the right-of-use asset)