Niko Limited signed a lease for a five-year term that requires yearly, beginning-of-year payments of \(\$ 104,000\), including \(\$ 9,600\) of annual maintenance and property taxes. Niko guarantees a residual value of \(\$ 26,500\) at the end of the lease term, although both parties expect the asset to be sold as used equipment for approximately \(\$ 35,000\) at that time.

Required

1. How much are Niko's minimum lease payments, as defined for lease accounting purposes?

2. If Niko's IBR is \(10 \%\), what amount will Niko record as an asset?

3. How much will Niko record as an asset if the residual value is unguaranteed?

4. Suppose that the fair value of the leased asset is \(\$ 375,000\) at the inception of the lease. How would this fact affect the amount recorded for the leased asset?