Sheridan Incorporated leases a piece of machinery to Concord Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $10,496 to be made at the beginning of each year. The machinery' has a fair value of $56,388, a book value of $42,080, and an economic life of 10 years. 2. 3. 4. At the end of the lease term, both parties expect the machinery to have a residual value of $21,040. To protect against a large loss, Sheridan requests Concord to guarantee $14,530 of the residual value, which Concord agrees to do. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. 5. The implicit rate is 5%, which is known by Concord. 6. Collectibility of the payments is probable.