At the beginning of $2024,$ VHF Industries acquired a machine with a fair value of $$6,442,750$ by signing a three$-$year lease. The lease is payable in three annual payments of $$2\mathrm{.}5$ million at the end each year.

Note: Use tables, Excel, or a financial calculator. $($FV of $$1,$ PV of $$1,$ FVA of $$1,$ PVA of $$1,$FVAD of $$1$ and PVAD of $$1)$

Required:

What is the effective rate of interest implicit in the agreement?

$2-4.$ Prepare the lessee's journal entries at the beginning of the lease, the first lease payment at December $31,2024$ and the second lease payment at December $31,2025.$

Suppose the fair value of the machine and the lessor's implicit rate were unknown at the time of the lease, but that the lessee's incremental borrowing rate of interest for notes of similar risk was $7\%.$ Prepare the lessee's entry at the beginning of the lease.