Oriole Incorporated leases a piece of machinery to Cheyenne Company on January 1, 2017, under the following terms. 1. The lease is to be for 4 years with rental payments of $14,814 to be made at the beginning of each year. 2. The machinery has a fair value of $72,000, a book value of $50,000, and an economic life of 10 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $24,000. To protect against a large loss, Oriole requests Cheyenne to guarantee $17,500 of the residual value, which Irving agrees to do. 4. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 7%, which is known by Cheyenne. 6. Collectibility of the payments is probable.