Larkspur Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Crane Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:

1.		Crane has the option to purchase the equipment for $15,500 upon termination of the lease. It is not reasonably certain that Crane will exercise this option.
2.		The equipment has a cost of $110,000 and fair value of $158,500 to Larkspur Leasing. The useful economic life is 2 years, with a residual value of $15,500.
3.		Larkspur Leasing desires to earn a return of 5% on its investment.
4.		Collectibility of the payments by Larkspur Leasing is probable.