Pharoah Manufacturing Ltd. has signed a lease agreement with LPN Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows:

		The lease is for 5 years commencing January 1, 2020.
		Pharoah must pay LPN $54,114 on January 1 of each year, beginning in 2020.
		Equipment of this type normally has an economic life of 6 years.
		LPN has concluded, based on its review of Pharoahs financial statements, that there is no unusual credit risk in this situation. LPN will not incur any further costs with regard to this lease.
		LPN purchases this equipment directly from the manufacturer at a cost of $197,025, and normally sells the equipment for $251,625.
		Pharoahs borrowing rate is 7%. LPNs implied interest rate is 6%, which is known to Pharoah at the time of negotiating the lease.
		Pharoah uses the straight-line method to depreciate similar equipment.
		Both Pharoah and LPN have calendar fiscal years (year end December 31), and follow ASPE.

From Pharoah Manufacturing's perspective, is this a capital or operating lease? Pharoah will classify this as a SHOW LIST OF ACCOUNTS capital lease operating lease Prepare a lease amortization schedule for this lease. (Round answers to o decimal places, e.g. 5,275.) Date Payment Interest Principal Balance January 1, 2020 January 1, 2020 January 1, 2021 January 1, 2022 January 1, 2023 January 1, 2024 SHOW LIST OF ACCOUNTS Prepare the journal entries on Pharoah Manufacturing's books on January 1, 2020. (Credit account titles are automatically inder entry" for the account titles and enter o for the amounts.) Debit Credit Date Account Titles and Explanation Jan. 1, 2020 (To record inception of lease.) (To record lease payment.) SHOW LIST OF ACCOUNTS Prepare the journal entries on LPN Leasing's books on January 1, 2020. (Credit account titles are automatically indented when the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Date Jan. 1, 2020 (To record inception of lease and cost of goods sold.) (Collection of lease payment.)