Glaus

Leasing Company agrees to lease machinery to Jensen Corporation on

January 1, 20121The following information relates to the lease

agreement.

1.		The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2.		The cost of the machinery is $420,000, and the fair value of the asset on January 1, 2011, is $560,000.
3.		At

the end of the lease term, the asset reverts to the lessor and has a

guaranteed residual value of $80,000. Jensen depreciates all of its

equipment on a straight-line basis.4. The lease agreement requires equal annual rental payments, beginning on January 1, 20112.5. The

collectibility of the lease payments is reasonably predictable, and

there are no important uncertainties surrounding the amount of costs yet

to be incurred by the lessor.6. Glaus

desires a 10% rate of return on its investments. Jensen