On January 1, 19A, Lessor rents a machine to Lessee for 3 years. Both the cost and the selling price are $30,000. The salvage value at the end of the 3-year period is $5,000, which is unguaranteed by Lessee. The interest rate, which is known to both parties, is 10%, and the lease meets all the conditions required to be a capital lease.
(a) Calculate the annual rental.
(b) Determine the amount to be capitalized by Lessor.
(c) Determine the amount to be capitalized by Lessee.