The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $116,406 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term $50,000 $45,000 6 years 6 years S642,000 Lease term Economic life of leased equipment Fair value of asset at January 1, Lessor's implicit rate Lessee's incremental borrowing rate 6 % 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places eg. 5,275.)

Question
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee.
Commencement date
January 1,
Annual lease payment due at the beginning of
each year, beginning with January 1,
$116,406
Residual value of equipment at end of lease term,
guaranteed by the lessee
Expected residual value of equipment at end of lease term
$50,000
$45,000
6 years
6 years
S642,000
Lease term
Economic life of leased equipment
Fair value of asset at January 1,
Lessor's implicit rate
Lessee's incremental borrowing rate
6 %
6 %
The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased
equipment.
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations
to 5 decimal places, eg. 1.25124 and the final answers to O decimal places eg. 5,275.)
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Transcribed Image Text

The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $116,406 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term $50,000 $45,000 6 years 6 years S642,000 Lease term Economic life of leased equipment Fair value of asset at January 1, Lessor's implicit rate Lessee's incremental borrowing rate 6 % 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places eg. 5,275.)

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