Sheridan Company leases a building to Skysong, Inc. on January 1, 2025. The following facts pertain to the lease agreement. 1. The lease term is 4 years, with equal annual rental payments of $4,848 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $19,900, a book value to Sheridan of $13,930, and a useful life of 5 years. 4. At the end of the lease term, Sheridan and Skysong expect there to be an unguaranteed residual value of $3,480. 5. Sheridan wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Skysong was unaware of the implicit rate used in the lease by Sheridan and has an incremental borrowing rate of 9%. Sheridan Lease receivable $ Present value of rental payments $ Skysong Lease liability/Right-of-use asset $