Current Attempt in Progress

Carla Vista Company leases a building to Tamarisk, Inc. on January $1,2025.$ The following facts pertain to the lease agreement.

The lease term is $4$ years, with equal annual rental payments of $$4,428$ at the beginning of each year.

Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a

specialized nature.

The building has a fair value of $$17,500,$ a book value to Carla Vista of $$10,500,$ and a useful life of $5$ years.

At the end of the lease term, Carla Vista and Tamarisk expect there to be an unguaranteed residual value of $$2,630.$

Carla Vista wants to earn a return of $9\%$ on the lease, and collectibility of the payments is probable. Tamarisk was unaware of

the implicit rate used in the lease by Carla Vista and has an incremental borrowing rate of $10\%.$

Click here to view factor tables.

How would Carla Vista $($lessor$)$ and Tamarisk $($lessee$)$ classify this lease?

Carla Vista would classify the lease as a

lease.

Tamarisk would classify the lease as a

lease.

How would Carla Vista initially measure the lease receivable, and how would Tamarisk initially measure the lease liability and right$-$of$-$

use asset? $($For calculation purposes, use $5$ decimal places as displayed in the factor table provided and round final answers to $0$ decimal places,

e$.$g$.5\mathrm{.}275.)$