Pharoah Company, a machinery dealer, leased a machine to Sheridan Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $27,300 at the beginning of each year. The first payment is received on January 1, 2025. Pharoah had purchased the machine during 2024 for $150,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease. Assume that Sheridan Corporation does not know the rate implicit in the lease used by Pharoah, and Sheridan's incremental borrowing rate is 9%. In addition, assume that Sheridan incurs initial direct costs of $19,000. Click here to view factor tables. (a) Your answer is correct. Compute the amount of the lease liability and right-of-use asset for Sheridan. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Lease liability $ Right-of-use asset $ 164700 183700

Pharoah Company, a machinery dealer, leased a machine to Sheridan Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $27,300 at the beginning of each year. The first payment is received on January 1, 2025. Pharoah had purchased the machine during 2024 for $150,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease. Assume that Sheridan Corporation does not know the rate implicit in the lease used by Pharoah, and Sheridan's incremental borrowing rate is 9%. In addition, assume that Sheridan incurs initial direct costs of $19,000. Click here to view factor tables. (a) Your answer is correct. Compute the amount of the lease liability and right-of-use asset for Sheridan. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Lease liability $ Right-of-use asset $ 164700 183700

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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