The following facts pertain to a noncancelable lease agreement between Riverbed Leasing Company and McKee Electronics, a lessee, for a computer system. Commencement date Lease term Economic life of leased equipment October 1, 2025 6 years 6 years Fair value of asset at October 1, 2025 $287,447 Book value of asset at October 1, 2025 $280,000 Residual value at end of lease term -0- Lessor's implicit rate 10 % Lessee's incremental borrowing rate Annual lease payment due at the beginning of each year, beginning with October 1, 2025 10 % $60,000 Date 10/01/20 Annual Lease Payment/Receipt Interest (10%) on Unpaid Liability/Receivable The collectibility of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease by the lessee and as a sales-type lease by the lessor. Balance of Lease Liability/Receivable $287,447 Reduction of Lease Liability/Receivable 10/01/20 $60,000 $60,000 227,447 10/01/21 60,000 $22,745 37,255 190,192 10/01/22 60,000 19.019 40,981 149,211 10/01/23 60,000 14,921 45,079 104,132 10/01/24 60,000 10,413 49,587 54,545 10/01/25 60,000 5,455 54,545 -0- $360,000 $72,553 $287,447