On December 31, 2019, Skysong Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Skysong to make annual payments of $8,162 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,100 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Skysong uses the straight-line method of depreciation for all of its plant assets. Skysongs incremental borrowing rate is 9%, and the lessors implicit rate is unknown. Click here to view factor tables.

(a)

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What type of lease is this?

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(b)

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Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)

Present value of the lease payments

$enter the Present value of the lease payments in dollars