Exercise 21A9 ab Pharoah Company a machinery dealer leased a

Exercise 21A-9 a-b Pharoah Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2017. The lease is for an 8-year period and requires equal annual payments of $32,300 at the beginning of each year. The first payment is received on January 1, 2017 Pharoah had purchased the machine during 2016 for $150,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 5% 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 Dexter Corporation does not know the rate implicit in the lease used by Pharoah, and Dexter\'s incremental borrowing rate is 7%. In addition, assume that Dexter incurs initial direct costs of $15,000. Compute the amount displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Right-of-use asset t is Prepare all n entered. Do not indent n ry journal entries for Dexter for 2017. ( ally. Round answers to O decimal placos e.g. 5,275.) Credit 4.24.6.2 Ins. All Rights Reserved. A Division of

Solution

Workings:

Workings:

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Lease Liability	$        206,374
Right to Use Assets	$        206,374