Question 1 of 5 - /20 E View Policies Current Attempt in Progress Pharoah Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2020, 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, 2020, 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, 2020. 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 PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. 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 $ 57845 Prepare an amortization schedule using a spreadsheet that would be suitable for the lessor for the lease term. (Round answers to O decimal places, e.g. 5,275.) Pharoah Leasing Corporation (Lessor) Lease Amortization Schedule Annual Lease Payment Date Plus URV Interest on Net Investment Net Investment Recovery Balance of Net Investment 1/1/20 $ HA 1/1/20 $ 57845 $ 57845 1/1/21 57845 22694 35151 1/1/22 57845 19530 38315 1/1/23 57845 16082 41763 1/1/24 57845 12323 45522 1/1/25 57845 8226 49619 12/31/25 45553 3769 41784 $ 392625 $ 82624 $ 310000 Prepare an amortization schedule using a spreadsheet that would be suitable for the lessor for the lease term. (Round answers to O decimal places, e.g. 5,275.) Corporation (Lessor) ion Schedule nnual Lease ayment Interest on Net Investment Net Investment Recovery Balance of Net Investment us URV $ 310000 57845 57845 252155 57845 22694 35151 217003 57845 19530 38315 178688 57845 16082 41763 1763 136925 57845 12323 12323 45522 91403 57845 8226 49619 41784 45553 3769 41784 0 392625 $ 82624 $ 310000 Prepare all of the journal entries for the lessor for 2020 and 2021 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 1/1/20 Cash 57845 Lease Receivable 252155 Equipment 282838 Sales Revenue 27162 (To record inception of lease and collection of lease payment.) 31/10/20 Lease Receivable 22694 Interest Income 22694 (To record interest.) 1/1/21 Cash 57845 Lease Liability 57845 (Collection of lease payment.) 31/10/21 Lease Receivable 19530 Interest Income 19530 (To record interest.) Prepare a comparative partial statement of income for Pharoah for fiscal years 2020 and 2021. Pharoah Leasing Limited Statement of Income (partial) For the Year Ended October 31, 2021 2020 Revenues Interest Income $ $
