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Pharoah Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $38,200 each, beginning December 31, 2019.
Pharoah Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $38,200 each, beginning December 31, 2019. In addition, Pharoah guarantees the lessor a residual value of $18,500 at the end of the lease. However, Pharoah believes it is probable that the expected residual value at the end of the lease term will be $9,250. The equipment has a useful life of 7 years. Prepare Pharoahs' December 31, 2019, journal entries assuming the implicit rate of the lease is 11% and this is known to Pharoah. (Credit account titles are automatically indented when amount is entered. Do not indent manually. 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.) Click here to view factor tables
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