Sheridan Company leases a building to Pharoah, Inc. on January $1,2025.$ The following facts pertain to the lease agreement.

The lease term is $5$ years, with equal annual rental payments of $$3,016$ at the beginning of each year.

Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a

specialized nature.

The building has a fair value of $$16,800,$ a book value to Sheridan of $$9,800,$ and a useful life of $6$ years.

At the end of the lease term, Sheridan and Pharoah expect there to be an unguaranteed residual value of $$4,460.$

Sheridan wants to earn a return of $6\%$ on the lease, and collectibility of the payments is probable. This rate is known by

Pharoah.Sheridan's Journal Entries

$($To record the lease$)$

$($To record lease payment$)$

Lease Receivable