Sheffield Corporation leased equipment to Shamrock, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1.267 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $9,300, a book value of $7,300, and Sheffield expects a residual value of $6,800 at the end of the lease term. Sheffield set the lease payments with the intent of earning a 6% return, though Shamrock is unaware of the rate implicit in the lease and has an incremental borrowing rate of 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.