The term of the lease is $7$ years with no renewal option, and the machinery has an estimated economic life of $9$ years.

The cost of the machinery is $$495,000,$ and the fair value of the asset on January $1,2025,$ is $$704,000.$

At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $$45,000.$ Buffalo estimates

that the expected residual value at the end of the lease term will be $$45,000.$ Buffalo amortizes all of its leased equipment on

a straight$-$line basis

The lease agreement requires equal annual rental payments, beginning on January $1,2025.$

The collectibility of the lease paryments is probable.

Flint desires a $9\%$ rate of return on its investments. Buffalo's incremental borrowing rate is $10\%,$ and the lessor's implicit rate

is unknown.

$[$Assume the accounting period ends on December $31.]$

Click here to view factor tables.

Your answer is correct.

Discuss the mature of this lease for both the lessee and the lessor.

This is a

$]$ for Buffalo

This is a

for Flint.

eTextbook and Media

List of Accounts

List of Accounts

X Your answer is incorrect

Calculate the amount of the annual rental payment required $($Round present value foctor calculations to $5$ decimal places, e$.$g$.$

$1\mathrm{.}25124$ and the final answer to $0$ decimal places eg$.58,972.)$

Annual rental payment

$

eTextbook and Media

List of Accounts

Yaur answer is incorrect.

Compute the value of the lease liability to the lessee $($Round present value foctor colculations to $5$ decimal places, e$.$g$.1\mathrm{.}25124$ and

the final answer to $0$ decimal ploces eg$.58,972.)$

Your answer is partially correct.

Prepare the journal entries Buffalo would make in $2025$ and $2026$ related to the lease arrangement. $($Credilt occount titiles are

outomatically indented when a mount is entered. Do not indent maruallk. If no entry is required, select $"$No Entry" for the account tities and

enter $0$ far the amounts. Round answers to $0$ decimal places eg$.58,972.$ Record journal entries in the arder presented in the problem. List

all debit entries before credit entries$)$