Larkspur Leasing Company agrees to lease equipment to Cullumber Corporation on January $1,2025.$ The 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 $$523,000,$ and the fair value of the asset on January $1,2025,$ is $$758,000.$

$3.$ At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $$60,000.$ Cullumber estimates that the expected residual value at the end of the lease term will be $$60,000.$ Cullumber amortizes all of its leased equipment on a straight$-$line basis.

$4.$ The lease agreement requires equal annual rental payments, beginning on January $1,2025.$

$5.$ The collectibility of the lease payments is probable.

$6.$ Larkspur desires a $10\%$ rate of r

$1)$Prepare the journal entries Larkspur would make in $2025$ and $2026$ related to the lease arrangement.$2)$Prepare the journal entries Cullumber would make in $2025$ and $2026$ related to the lease arrangement.$3)$Suppose Larkspur expects the residual value at the end of the lease term to be $$40,000$ but still guarantees a residual of $$50,000.4)$Compute the value of the lease liability at lease commencement.