On January 2, 2017 Teal Company leases a machine with a fair value of $34,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,550 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,800. Teal Company guarantees the residual value of $4,400 and expects the asset to have a value of $4,400 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Teal Company's incremental borrowing rate is 9% a year. Snead's implicit rate is unknown. (a)