Please show work. This is a question from an old exam. This is the only information available. RE enters into a three-year lease with K Manufacturing for a D600. K Manu. had a COGS of 124,000 and the fair value of the D600 was $190,000. Fe guarantees a 20,000 residual value. K structures the lease for a 7.5% return. FE Controller T.J Everett does not know the fair value of the machine, and estimates its incremental borrowing rate to be 9.2%

Book the lease origination for both parties. The first payment will be due at the beginning of the lease.