Flint Leasing Company agrees to lease equipment to Buffalo 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 $$510,000,$ and the fair value of the asset on January $1,2025,$ is $$717,000.$

At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of

$$60,000.$ Buffalo estimates that the expected residual value at the end of the lease term will be

$$60,000.$ Buffalo 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.

Flint desires a $11\%$ rate of return on its investments. Buffalo's incremental borrowing rate is $12\%,$ and

the lessor's implicit rate is unknown.

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

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

This is a

for Buffalo.

This is a

for Flint.

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Calculate the amount of the annual rental payment required. $($Round present value factor calculations to $5$ decimal places, e$.$g$.$

$1\mathrm{.}25124$ and the final answer to $0$ decimal places e$.$g$.58,972.)$

Annual rental payment $

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B$)$ Prepare the journal entries Buffalo Would make in $2025$ and $2-26$ related to the lease arrangement

C$)$ Prepare the journal entries Flink would make in $2025$ and $2026$ related to the lease arrangement

D$)$ Suppose Buffalo 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. $($Round present value factor calculations to $5$ decimal places, e$.$g$.,1\mathrm{.}25124$ and the final answer to $0$ decimal places e$.$g$.,58,972.)$

Lease liability $