Calculate the amount of the annual rental payment required. Pina Leasing Company agrees to lease equipment to Grouper Corporation on January $1,2025.$ The following information relates to

the lease agreement.

The term of the lease is $7$ years with no renewal option, and the machinery has an estimated economic life of $9$ years.

The cost of the machinery is $$525,000,$ and the fair value of the asset on January $1,2025,$ is $$713,000.$

At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $$45,000.$ Grouper

estimates that the expected residual value at the end of the lease term will be $$45,000.$ Grouper amortizes all of its leased

equipment on a straight$-$line basis.

$,$ The lease agreement requires equal annual rental payments, beginning on January $1,2025.$

The collectibility of the lease payments is probable.

Pina desires a $11\%$ rate of return on its investments. Grouper's incremental borrowing rate is $12\%,$ and the lessor's implicit

rate is unknown.

$($Assume the accounting period ends on December $31.)$

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$(a)$

Your answer is correct.

Discuss the nature of this lease for both the lessee and the lessor.

This is a

for Grouper.

This is a

for Pina.