At the beginning of the year $2023,$ RUSTY Company entered into a lease contract covering a machinery:

Annual lease payments to be paid every January $1$

Lease term

P$1,200,000$

Useful life of the machinery

Guaranteed residual value

$8$ years

$12$ years

Residual value of the machinery after useful life

$200,000$

Implicit rate know to the Company

$7\%$

Incremental borrowing rate of the Company

$8\%$

Assumption $1$: The machinery's expected value at the end of the lease term is P$400,000$