Sherican Corporation manufactures specia ty eauioment with an estimated economic ife of 12 vears andleases it to ProvinciaAirlines Corp. for a period of 10 years. Both Sheridan and Provincial Airlines follow ASPE. The equipment's normal selling price is210.482 and its unguaranteed residual value at the end of the lease term is estimated to be $16.000. Provincial Airlines will makeannual payments of $25.600 at the beginning of each vear and pay for all maintenance and insurance. Sheridan incurred costs of$105,000 in manufacturing the equipment and $7,000 in negotiating and closing the lease. Sheridan has determined that thecollectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interestrate is 10%. Provincial Airlines Corp. has an incremental borrowing rate of 10%.