1. On January 1, 2020, Oriole Company leased equipment to Flynn Corporation. The following information pertains to this lease.

1.		The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $9,000.
2.		Equal rental payments are due on January 1 of each year, beginning in 2020.
3.		The fair value of the equipment on January 1, 2020, is $185,000, and its cost is $120,000.
4.		The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis.
5.		Oriole set the annual rental to ensure a 6% rate of return. Flynns incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown.
6.		Collectibility of lease payments by the lessor is probable.

Both the lessor and the lessees accounting periods end on December 31.

Calculate the amount of the annual rental payment. (Round answer to 0 decimal places, e.g. 5,275.)

Annual rental payment

2. Pearl Leasing Company agrees to lease equipment to Martinez Corporation on January 1, 2020. The following information relates to the lease agreement.

1.		The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2.		The cost of the machinery is $523,000, and the fair value of the asset on January 1, 2020, is $758,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Martinez estimates that the expected residual value at the end of the lease term will be 60,000. Martinez amortizes all of its leased equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		The collectibility of the lease payments is probable.
6.		Pearl desires a 10% rate of return on its investments. Martinezs incremental borrowing rate is 11%, and the lessors implicit rate is unknown.

(Assume the accounting period ends on December 31.)

Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)

Annual rental payment