Testbank Problem 118 Pharoah Company, as lessee, enters into a lease agreement on July 1, 2021, for equipment. The following data are relevant to the lease agreement: 1 The term of the noncancelable lease is 4 years, with no renewal option. Payments of $863,707 are due on July 1 of each year. 2. The fair value of the equipment on July 1, 2021 is $3,050,000. The equipment has an economic life of 6 years with no salvage value. 3. Pharoah depreciates similar machinery it owns on the sum-of-the-years-digits basis. 4. The lessee pays all executory costs. 5. Pharoah's incremental borrowing rate is 10% per year. The lessee is aware that the lessor used an implicit rate of 9% in computing the lease payments. Click here to view factor tables Indicate the type of sease Pharoah Company has entered into and what accounting treatment is applicable Prepare the journal entries on Pharoah's books that relate to the lease agreement for the following dates: (Credit account titles are automatically indented when amount Is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 5,250.) 1. 2 3. July 1, 2021. December 31, 2021. July 1, 2022 December 31, 2022 Debit Account Titles and Explanation Date Credit Prepare the journal entries on Pharoah's books that relate to the lease agreement for the following dates: (Credit account tities are automatically indented when amount is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.. 5,250.) 1. July 1, 2021 2. December 31, 2021 3. July 1, 2022 December 31, 2022 Date Account Titles and Explanation Debit Credit 1 B (To record amortization) (To record interest payment) 4% Future Value of 1 (Future Value of a Single Sum) FVFn = (1 + )" (n) Periods 2% 2%% 3% 5% 6% 1 1.02000 1.02500 1.03000 1.04000 1.05000 1.06000 2 1.04040 1.05063 1.06090 1.08160 1.10250 1.12360 3 1.06121 1.07689 1.09273 1.12486 1.15763 1.19102 4 1.08243 1.10381 1.12551 1.16986 1.21551 1.26248 5 1.10408 1.13141 1.15927 1.21665 1.27628 1.33823 6 7 8 9 10 1.12616 1.14869 1.17166 1.19509 1.21899 1.15969 1.18869 1.21840 1.24886 1.28008 1.19405 1.22987 1.26677 1.30477 1.34392 1.26532 1.31593 1.36857 1.42331 1.48024 1.34010 1.40710 1.47746 1.55133 1.62889 1.41852 1.50363 1.59385 1.68948 1.79085 11 12 13 14 15 1.24337 1.26824 1.29361 1.31948 1.34587 1.31209 1.34489 1.37851 1.41297 1.44830 1.38423 1.42576 1.46853 1.51259 1.55797 1.53945 1.60103 1.66507 1.73168 1.80094 1.71034 1.79586 1.88565 1.97993 2.07893 1.89830 2.01220 2.13293 2.26090 2.39656 16 17 18 19 20 1.37279 1.40024 1.42825 1.45681 1.48595 1.48451 1.52162 1.55966 1.59865 1.63862 1.60471 1.65285 1.70243 1.75351 1.80611 1.87298 1.94790 2.02582 2.10685 2.19112 2.18287 2.29202 2.40662 2.52695 2.65330 2.54035 2.69277 2.85434 3.02560 3.20714 21 22 23 24 25 1.51567 1.54598 1.57690 1.60844 1.64061 1.67958 1.72157 1.76461 1.80873 1.85394 1.86029 1.91610 1.97359 2.03279 2.09378 2.27877 2.36992 2.46472 2.56330 2.66584 2.78596 2.92526 3.07152 3.22510 3.38635 3.39956 3.60354 3.81975 4.04893 4.29187 26 27 28 29 30 1.67342 1.70689 1.74102 1.77584 1.81136 1.90029 1.94780 1.99650 2.04641 2.09757 2.15659 2.22129 2.28793 2.35657 2.42726 2.77247 2.88337 2.99B70 3.11865 3.24340 3.55567 3.73346 3.92013 4.11614 4.32194 4.54938 4.82235 5.11169 5.41839 5.74349