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 $500,000, and the fair value of the asset on January 1,2020 , is $659,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Ayayai estimates that the expected residual value at the end of the lease term will be 60,000 . Ayayai 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. Cheyenne desires a 9% rate of return on its investments. Ayayai's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) (a) Your answer is correct. Discuss the nature of this lease for both the lessee and the lessor. This is a for Ayayai. This is a for Cheyenne. eTextbook and Media List of Accounts Attempts: 2 of 5 used (b) 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