The Herbertson Company leases machines to clients. Annual rentals are paid each year, with the first payment due on the day the lease begins. A machine with a book value of $10,000 is leased. Unguaranteed salvage value is $1,000. Lease term is five years. Herbertson's interest rate is 5%. What is the annual lease payment?

On January 1, 2016, The Hammel Company (lessee) entered into a five-year, noncancelable lease for a machine with payments of $25,981.62 due each January 1. The first payment is due January 1, 2016. The McMillan Company (lessor) has a 10% interest rate known by Hammel.

Fair Value and book value of machine: $100,000

Property Taxes included in annual $25,981.62 payments $2,000

No renewal options. No salvage value

Straight line depreciation used by both lessee and lessor.

Economic life of the asset is 5 years.

McMillan's 2016 Interest Revenue will be: