Pharoah Company leases a building to Oriole, Inc, on January $1,2025.$ The following facts pertain to the lease agreement.

The lease term is $5$ years, with equal annual rental payments of $$4,069$ at the beginning of each year.

Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.

The building has a fair value of $$19,500,$ a book value to Pharoah of $$13,845,$ and a useful life of $6$ years.

At the end of the lease term, Pharoah and Oriole expect there to be an unguaranteed residual value of $$3,460.$

Pharoah wants to earn a return of $9\%$ on the lease, and collectibility of the payments is probable. This rate is known by Oriole.

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$($b$)$ Using the original facts of the lease, show the journal entries to be made by both Pharoah and Oriole in $2025.($List all debit entries before credit entries. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places, e$.$g$.5,275.$ Credit account titles are automatically indented when the amount is entered. Do not indent manually.$)$

Pharoah's Journal Entries

Oriole's Journal Entries

$\backslash$table$[[\frac{1}{1}\frac{?}{25},,$Right$-$of$-$Use Asset,,$],[,,4069],[($To record the lease$),,],[($To record lease payment$),,],[($To record interest expense$),,],[($To record amortization of the right$-$of$-$use asset$),,]]$