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On December 31,2025, Pharoah Corporation leased a plane from Flounder Company for a seven-year period...

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Accounting

On December 31,2025, Pharoah Corporation leased a plane from Flounder Company for a seven-year period expiring December 31,2032. Equal annual payments of $454000 are due on December 31 of each year, beginning with December 31,2025. The lease is properly classified as a finance lease on Pharoah's books. The present value at December 31,2025 of the eight lease payments over the lease term discounted at 11% is $2593337. Assuming the first payment is made on time, the amount that should be reported by Pharoah Corporation as the lease liability on its December 31,2025 balance sheet is
$2593337.
$2374664.
$2139337.
$2424604.
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