Exercise 21-02

On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Marin to make annual payments of $8,479 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,600 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Marin uses the straight-line method of depreciation for all of its plant assets. Marins incremental borrowing rate is 7%, and the lessors implicit rate is unknown.