Blossom Leasing Company agrees to lease equipment to Blue 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 $520,000, and the fair value of the asset on January 1, 2020, is $737,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Blue estimates that the expected residual value at the end of the lease term will be 60,000. Blue 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. Blossom desires a 10% rate of return on its investments. Blue's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Suppose Blue expects the residual value at the end of the lease term to be $50,000 but still guarantees a residual of $60,000. Compute the value of the lease liability at lease commencement. Lease liability to $