FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On January 1, 2025, a machine was purchased for $980,000 by Shamrock Co. The machine is expected to have an 8-year life with no
salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Pharoah Inc. for 3 years on January 1, 2025,
with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a
residual value at the end of the lease term of $562,500, though this amount is unguaranteed.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
How much should Shamrock report as income before income tax on this lease for 2025?
Income before income tax
$
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Transcribed Image Text:On January 1, 2025, a machine was purchased for $980,000 by Shamrock Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Pharoah Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) How much should Shamrock report as income before income tax on this lease for 2025? Income before income tax $
Record the journal entries Pharoah would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the
rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the
amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Date
1/1/25
1/1/25
1/1/25
Account Titles and Explanation
(To record the lease)
(To record lease payment)
Debit
Credit
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Transcribed Image Text:Record the journal entries Pharoah would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Date 1/1/25 1/1/25 1/1/25 Account Titles and Explanation (To record the lease) (To record lease payment) Debit Credit
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