Bridgeport Corporation entered into a lease agreement on January 1, 2020, to provide Ivanhoe Company with a piece of machinery. The terms of the lease agreement were as follows.1.The lease is to be for 3 years with rental payments of $11,200 to be made at the beginning of each year.2.The machinery has a fair value of $58,000, a book value of $40,000, and an economic life of 8 years.3.At the end of the lease term, both parties expect the machinery to have a residual value of $20,000, none of which is guaranteed.4.The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature.5.The implicit rate is 4%, which is known by Dawkins. Collectibility of the payments is probable.
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