Ivanhoe Leasing Company agrees to lease equipment to Shamrock Corporation on January $1,2025.$ The following information relates to the lease agreement.

The term of the lease is $6$ years with no renewal option, and the machinery has an estimated economic life of $8$ years.

The cost of the machinery is $$303,000,$ and the fair value of the asset on January $1,2025,$ is $$431,000.$

At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $$35,300.$ Shamrock estimates that the expected residual value at the end of the lease term will be $$35,300.$ Shamrock 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.

Ivanhoe desires a $6\%$ rate of return on its investments. Shamrock's incremental borrowing rate is $8\%,$ and the lessor's implicit rate is unknown.

$($Assume the accounting period ends on December $31$ and that neither company uses reversing entries.$)$

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Correct Answer $($Used$)$

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

$($c$)$

Your answer is correct.

Compute the value of the lease liability to the lessee. $($Round present value factor calculations to $5$ decimal places, e$.$g$.$

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

Present value of minimum lease payments $

Suppose Shamrock expects the residual value at the end of the lease term to be $$28,300$ but still guarantees a residual of $$35,300.$ Compute the value of the lease liability at lease commencement.

Lease liability