On January 1, 2020, Cullumber Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $6,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1,2020 , is $170,000, and its cost is $140,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Cullumber set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. Discuss the nature of this lease to Cullumber and Flynn. The nature of this lease for Cullumber is a lease. The nature of this lease for Flynn is a lease. Calculate the amount of the annual rental payment. (Round answer to 0 decimal places, e.g. 5,275. ) Annual rental payment $ eTextbook and Media List of Accounts Attempts: 5 of 5 used Your answer is partially correct. Prepare all the necessary journal entries for Cullumber for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, eg. 5,275. Record journal entries in the order presented in the problem.) Suppose the collectibility of the lease payments was not probable for Cullumber. Prepare the necessary journal entry for the company in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 eTextbook and Media Attempts: 1 of 5 used Prepare all the necessary journal entries for Flynn for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, eg. 5,275. Record journal entries in the order presented in the problem.) Prepare the effect on the journal entry for Flynn at lease commencement, assuming initial direct costs of $2,000 are incurred by Flynn to negotiate the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)