Sunland Ltd$.$ recently signed a lease for equipment from Photon Inc. The lease term is five years and requires equal rental payments of $$28,200$ at the beginning of each year. The equipment has a fair value at the lease's inception of $$123,000,$ an estimated useful life of eight years, and no residual value. Sunland pays all executory costs directly to third parties. Photon set the annual rental to earn a rate of return of $8\%,$ and this fact is known to Sunland. The lease does not transfer title or contain a BPO.

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