Problem 21A-7 a-c Pharoah Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $507,480, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $14,500. The hospital will pay rents of $59,000 at the beginning of each year. Pharoah incurred costs of $273,000 in manufacturing the machine and $12,000 in legal fees directly related to the signing of the lease. Pharoah has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 4%.

Problem 21A-7 a-c Pharoah Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $507,480, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $14,500. The hospital will pay rents of $59,000 at the beginning of each year. Pharoah incurred costs of $273,000 in manufacturing the machine and $12,000 in legal fees directly related to the signing of the lease. Pharoah has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 4%. Click here to view factor tables Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 5,275.) (1) Lease receivable at commencement of the lease (2) Sales price (3) Cost of sales Prepare a 10-year lease amortization schedule for Pharoah, the lessor. (Round answers to 0 decimal places e.g. 5,275.) PHAROAH INC. (Lessor) Lease Amortization Schedule (Annuity due basis, guaranteed residual value) Annual Lease Payment Interest on Recovery of Lease Plus Residual Value Lease Receivable Receivable Beginning of Year Lease Receivable Initial PV End of 10 No. Account Titles and Explanation Debit Credit 1. (To record the lease.) (To record the incurrence of initial direct costs relating to the lease.) (To record receipt of the first lease payment.) 3. (To record interest earned during the first year of the lease.)