Coronado Steel Company, as lessee, signed a lease agreement for equipment for $5$ years, beginning December $31,2025.$ Annual rental

payments of $$48,000$ are to be made at the beginning of each lease year $($December $31).$ The interest rate used by the lessor in setting

the payment schedule is $4\%$; Coronado's incremental borrowing rate is $6\%.$ Coronado is unaware of the rate being used by the lessor.

At the end of the lease, Coronado has the option to buy the equipment for $$5,000,$ considerably below its estimated fair value at that

time. The equipment has an estimated useful life of $7$ years, with no salvage value. Coronado uses the straight$-$line method of

depreciation on similar owned equipment.