The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Sunland Company, a lessee.

Commencement dateJanuary 1

,Annual lease payment due at the beginning of

each year, beginning with January 1,$119,072

Residual value of equipment at end of lease term,

guaranteed by the lessee$50,000

Expected residual value of equipment at end of lease term$45,000

Lease term6years

Economic life of leased equipment6years

Fair value of asset at January 1,$626,000

Lessor's implicit rate8%

Lessee's incremental borrowing rate8%

I have already completed the amortization schedule and the journal entries for the first two years. I just need help with the final part of this problem

Suppose Sunland received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected?What if Sunland prepaid rent of $5,000 to Faldo?

The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.