On 1 July 2019, Sky Ltd purchased equipment and then leased it to Blue Ltd. Blue Ltd incurred $1 200 in costs to negotiate the lease agreement. Sky Ltd incurred $3 000 in initial costs to prepare and execute the lease agreement. The lease agreement details are as follows.

Lease Term	4 years
Annual rental payments (payable in advance on 1 July each year)	$ 57 000
Residual value at the end of the lease term	$10 000
Residual value guarantee	$ 9 000
Amount of the residual value guarantee that is expected to be payable by the lessee at the end of the lease term	$2 000
Interest rate implicit in the lease	5%

Blue Ltd expects to return the equipment to Sky Ltd at the end of the 4-year lease term. The annual rental payments include an amount of $7,000 to cover the cost of maintenance and repairs that were arranged and paid for by Sky Ltd.