Pharoah Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an8-year period and requires equal annual payments of $29,625at the beginning of each year. The first payment is received on January 1, 2020. Pharoah had purchased the machine during 2019 for $128,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease.