Should they purchase the refrigeraators?

The estimated fair market value of refrigerators at inception of the lease was $132,000.

The lease term is for six years and the estimated useful life of the refrigerators is nine years. Annual lease payments of $22,000 are to be made at the beginning of each year and are expensed by JJI. The interest rate implicit in the lease is 10%. At the end of the lease JJI has the option of purchasing the refrigerators for fair market value. Although not written in the lease, JJI has indicated to the lessor that it does plan to purchase the refrigerators. As per the lease agreement, a $20,000 penalty is payable to Carlins Inc. if the purchase option is not exercised.