Rhone-Metro Industries manufactures equipement that is sold or leased. On December 31, 2021, Rhone-Metro leased equipement to Western Soya Co. for a noncancelable stated lease term of four years ending December 31, 2025, at which time possession of the leased asset will revet back to Rhone-Metro. The equipement cost $280,000.00 to manufacture and has an expected useful life of six years. Its normal sales price is $329,209. The expected residual value of $15,000 at December 31, 2025, is not guaranteed. Western Soya Co. is reasonalbly certain to exercise a purchase option on December 30, 2024, at an option price of $8,000. Equal payments under the lease are $121,000 (including $5,000 annual maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 9%. Western Soya knows the interest rate implicit in the lease payments is 8%. Both companies use straight-line amortization.