Lehman Dairy leases its milking equipment from Chavez Finance Company under the following lease terms. 1. The lease term is 10 years, noncancelable, and requires equal rental payments due at the beginning of each year starting January 1, 2022. 2. The equipment has a fair value of $455,000, and cost Chavez $350,000 at the inception of the lease (January 1, 2022). 3. The estimated economic life of the equipment is 10 years, and a residual value (which is guaranteed by Lehman Dairy) of $28,200. Lehman Dairy expects to pay $15,000 under the guaranteed residual value. 4. The lease contains no renewable options, and the equipment reverts to Chavez Finance Company upon termination of the lease. 5. Lehman Dairy's incremental borrowing rate is 8% per year. The Chavez's implicit rate is 6% and is unknown to Lehman Dairy. 6. Collectability of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. Present value of 1 for 10 periods at 6% Present value of 1 for 10 periods at 8% 0.55839 0.46319 Present value of annuity for 10 periods at 6% 7.36009 Present value of annuity for 10 periods at 8% 6.71008 Present value of annuity due for 10 periods at 6% 7.80169 Present value of annuity due for 10 periods at 8% 7.24689 Instructions Using the sheets provided, answer the following questions (Assume the accounting period ends on December 31.): 1. What type of lease is this for the lessee? For the lessor? 2. Calculate the payments that Chavez Finance Company requires to recover the $455,000 fair value? 3. Prepare the journal entries Chavez Finance Company would make in 2022 related to the lease arrangement.