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

The lease term is $5$ years, with equal annual rental payments of $$3,200$ at the beginning of each year.

Ownership does not trangfer at the end of the lease term, there is no barzain purchase option, and the assat is not of a

specialized nature.

The building has a fair value of $$16,900,$ a book value to Pharoah of $$9,800,$ and a useful life of $6$ years.

At the end of the lease term, Pharoah and Shamrock expect there to be an unguarantesd residual value of $$4,410.$

Pharoah wants to earn a return of $996$ on the lease, and collectibility of the payments is probable. Shamrock was unaware of

the implicit rate used in the lease by Pharcah and has an incremental borrowing rate of $9\%.$

Click here to view factor tables.

How would Pharoah $($lessor$)$ and Shamrock $($lesses$)$ classify this lease?

Pharoah would classify the lease as a

lease.

Shamrock would classify the lease as a

lease.

How would Pharoah initially measure the lease racaivable, and how would Shamrock initially measure the lease lability and right$-$of$-$

use asset? $($For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places,

e$.$s$.5,275.)$

Pharoah

Lease receivable

Present value of rental payments $