A company leased machinery on January 1, for a three-year period ending December 31, 2025. The lease agreement stated annual lease payments beginning with the first payment at the beginning of the lease, and each thereafter on December 31.

• The fair value of the machinery was $167,157 (equal to the cost to the lessor)
• The lessee had the option to purchase the machinery on December 31, 2025 for $55,000 which was expected to be a sufficient difference from the fair value that exercise seems reasonably certain.
• The lessee is aware of the lessor's 10% implicit rate of interest

The machinery's useful life was six years with no salvage value.

Questions:

1. Compute lease payment (show lessor calculation)
2. Complete amortization schedule
3. Prepare lessee and lessor journal entries on January 1, 2023 and December 31, 2023.