*Problem 21-16 Flounder Corporation entered into a lease agreement on January 1, 2020, to provide Pharoah Company with a plece of machinery. The terms of the lease agreement were as follows. 1. The lease is to be for 3 years with rental payments of $11,933 to be made at the beginning of each year. 2. The machinery has a fair value of $59,000, a book value of $40,000, and an economic life of 8 years At the end of the lease term, both parties expect the machinery to have a residual value of $30,000, none of which is guaranteed. The lease does not transfer ownership at the end of the lease tem, does not have a bargain purchase option, and the asset is not of a specialized nature. 5. The Implicit rate is 5%, which is known by Dawkins. 6. Collectibility of the payments is probable. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lesse For the lessee, It is a operating lease and for the lessor, it is a operating lease Prepare the amortization schedules Pharoah will use over the lease term. PHAROAH COMPANY Lease Amortization Schedule Annuity-Due Basis Interest Reduction of on Liability Lease Liability Annual Payment Lease Liability Date 1/1/20 $ 33811 1/1/20 $11933 so 21878 1/1/21 1313 s 11933 10620 11258 11933 11933 11258 1/1/22 675 0 Lease Expense Schedule (C) Amortization of (B) Right-of-Use Asset Interest on (and Liability) Lease Liability (A-B) (A) Straight-Line Expense Carrying Value of Right-of-Use Asset Date 1/1/20 $33811 12/31/20 11933 $ 11933 21878 11258 12/31/21 11933 1313 10620 12/31/22 11933 678 11258 lo the account titles and Prepare the 2020 journal entries for Pharoah. (Credit account Litles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1 Leased Asset 33811 33811 Lease Liability (To record lease) Jan. 1 11933 11933 Cash (To record first case payment) Dr. 31 (To record lease expert and amortization) Prepare the 2020 journal entries for Flounder. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit jan. 1 (To record lease payments) Dec. 31 (To record case revenue) Der. 31 (To record depreciation) Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Pharoah would need, assuming it elects to use the short-term lease option. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1 *Problem 21-16 Flounder Corporation entered into a lease agreement on January 1, 2020, to provide Pharoah Company with a plece of machinery. The terms of the lease agreement were as follows. 1. The lease is to be for 3 years with rental payments of $11,933 to be made at the beginning of each year. 2. The machinery has a fair value of $59,000, a book value of $40,000, and an economic life of 8 years At the end of the lease term, both parties expect the machinery to have a residual value of $30,000, none of which is guaranteed. The lease does not transfer ownership at the end of the lease tem, does not have a bargain purchase option, and the asset is not of a specialized nature. 5. The Implicit rate is 5%, which is known by Dawkins. 6. Collectibility of the payments is probable. Click here to view factor tables. Evaluate the criteria for classification of the lease, and describe the nature of the lesse For the lessee, It is a operating lease and for the lessor, it is a operating lease Prepare the amortization schedules Pharoah will use over the lease term. PHAROAH COMPANY Lease Amortization Schedule Annuity-Due Basis Interest Reduction of on Liability Lease Liability Annual Payment Lease Liability Date 1/1/20 $ 33811 1/1/20 $11933 so 21878 1/1/21 1313 s 11933 10620 11258 11933 11933 11258 1/1/22 675 0 Lease Expense Schedule (C) Amortization of (B) Right-of-Use Asset Interest on (and Liability) Lease Liability (A-B) (A) Straight-Line Expense Carrying Value of Right-of-Use Asset Date 1/1/20 $33811 12/31/20 11933 $ 11933 21878 11258 12/31/21 11933 1313 10620 12/31/22 11933 678 11258 lo the account titles and Prepare the 2020 journal entries for Pharoah. (Credit account Litles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1 Leased Asset 33811 33811 Lease Liability (To record lease) Jan. 1 11933 11933 Cash (To record first case payment) Dr. 31 (To record lease expert and amortization) Prepare the 2020 journal entries for Flounder. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit jan. 1 (To record lease payments) Dec. 31 (To record case revenue) Der. 31 (To record depreciation) Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Pharoah would need, assuming it elects to use the short-term lease option. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1