On January $1,2022$ Company a leases a vehicle to company b$.$ The details are as follows.

$$ The lease has a non$-$cancelable term of $4$ years.

$$ Ownership is not transferred, no purchase option, not specialized. Collectability is likely.

$$ The equipment has a fair value of $$600,000,$ it cost company a $$500,000$ to produce, has a useful life of $8$ years, and a salvage value of $$10,000.$

$$ At the end of the lease term, Company A expects the equipment to be worth $$70,000.$ None of the equipment$$s residual value is guaranteed by Company B$.$

$$ Based on the assessed risk Company A has priced a $7\%$ rate of return into the lease. Company B$$s incremental borrowing rate is $7.\%\%.$

$$ Equal payments are due at the beginning of each year. Both companies have December $31`$st fiscal year ends.