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Oriole Leasing Company leases a new machine to Pharoah Corporation. The machine has a cost of $65,000 and fair value of $92,500. Under the 3-year,
Oriole Leasing Company leases a new machine to Pharoah Corporation. The machine has a cost of $65,000 and fair value of $92,500. Under the 3-year, non-cancelable contract, Pharoah will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Oriole expects to earn an 8% return on its investment, and this implicit rate is known by Pharoah. The annual rentals are payable on each December 31, beginning December 31, 2025. Prepare the journal entry at commencement of the lease for Pharoah, assuming (1) Pharoah does not know Oriole's implicit rate (Pharoah's incremental borrowing rate is 9%), and (2) Pharoah incurs initial directs costs of $9,000. (List all debit entries before credit entries. Credit account titles are automatically indented when 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 final answers to O decimal places eg. 5,275.) Date Account Titles and Explanation 1/1/25 Debit Credit
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