On January 1, 2022, Chambers Company leased equipment to Daylight Corporation. The following information pertains to this lease: 1. The term of the non-cancelable lease is 4 years. At the end of the lease term, Daylight has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $15,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2022. 3. The fair value of the equipment on January 1, 2022, is $220,000, and its cost is $192,000. 4. The equipment has an economic life of 5 years. Daylight depreciates all of its equipment on a straight-line basis. 5. Chambers set the annual rental to ensure a 4% rate of return. Daylights incremental borrowing rate is 5%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. 7. Assume the lessors annual accounting period ends on December 31. Note: Round all numbers up to the nearest dollar.

(a) Discuss the nature of this lease to Chambers.

(b) Calculate the amount of the annual rental payment.

(c) Prepare all the necessary journal entries for Chambers for 2022.