"On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purchased the equipment for a cost of 50,000.

The lease agreement specifies Four annual payments of $15,000 beginning January 1, 20x4, the beginning of the lease, and at each December 31 from 20x4 to 20x7. The four year term ending December 31, 20x8, is equal to the estimated useful life of the equipment. Smoothie LLC routinely acquires smoothie equipment for lease to other vendors. The interest rate in these financing agreements is 10%."