Pharoah Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2017 to lease equipment to Irvine Limited. The following information relates to the agreement. 1. The term of the non-cancellable lease is six years, with no renewal option. The equipment has an estimated economic life of eight years. 2. The asset's cost to Pharoah, the lessor, is $310,000. The asset's fair value at January 1, 2017 is $310,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $45,553, which is not guaranteed. 4. Irvine Limited, the lessee, assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2017. 6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties about costs that have not yet been incurred by the lessor. Click here to view the factor table. Assuming that Pharoah Leasing desires a 9% rate of return on its investment, use time value of money tables, a financial calculator, or Excel functions to calculate the amount of the annual rental payment that is required. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.) Annual rental payment $ Prepare an amortization schedule that would be suitable for the lessor for the lease term. (Round answers to 0 decimal places, e.g. 5,275.) Pharoah Leasing Corporation (Lessor) Lease Amortization Schedule Annual Lease Interest Net Payment on Net Investment Plus URV Investment Recovery Balance of Net Investment Date 1/1/17 $ 1/1/17 $ $ $ 1/1/18 1/1/19 1/1/20 1/1/21 1/1/22 12/31/22 $ Prepare all of the journal entries for the lessor for 2017 and 2018 to record the lease agreement, the receipt of lease payments, and the recognition of income. Assume that Pharoah prepares adjusting journal entries only at the end of the fiscal year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Cash Lease Receivable Equipment Acquired for Lessee Unearned Interest Income 31/10/17 ~ Unearned Interest Income Interest Income (To record accrued interest) 1/1/18 Cash Lease Receivable (To record the receipt of lease payment) 31/10/18 Unearned Interest Income Interest Income (To record accrued interest) Prepare a comparative partial statement of income for Pharoah for fiscal years 2017 and 2018. Pharoah Leasing Limited Statement of Income (partial) For the Year Ended October 31, 2018 2017 Revenues Interest Income $
