The computer was carried on Elmers books at a value of $600,000.

1. The term of the non-cancelable lease is 3 years; title will not transfer to Elmers, and the expected residual value at the end of the lease is $450,000, all of which is unguaranteed.
2. The lease agreement requires equal rental payments of $115,970 at the beginning of each year.
3. The incremental borrowing rate for Elmers is 8%. Elmers is aware that Liquidity Finance set the annual rental to ensure a rate of return of 8%.
4. The computer has a fair value of $680,000 on January 1, 2025, and an estimated economic life of 10 years.

Assume that on January 1,2025 , Elmer's Restaurants sells a computer system to Sheridan Finance Co. for $640,000 and immediately leases back the computer system. The relevant information is as follows. 1. The computer was carried on Elmer's books at a value of $560,000. 2. The term of the non-cancelable lease is 3 years; title will not transfer to Elmer's, and the expected residual value at the end of the lease is $410,000, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $113,090 at the beginning of each year. 4. The incremental borrowing rate for Elmer's is 5\%. Elmer's is aware that Sheridan Finance set the annual rental to ensure a rate of return of 5%. 5. The computer has a fair value of $640,000 on January 1,2025 , and an estimated economic life of 10 years