On January $1,2025,$ Chambers Company leased equipment to Daylight Corporation. The following information pertains to this lease.

The term of the non$-$cancelable lease is $4$ years. At the end of the lease term, Daylight has the option to purchase the equipment for $$2,000,$ while the expected residual value at the end of the lease is $$15,000.$

Equal rental payments are due on January $1$ of each year, beginning in $2025.$

The fair value of the equipment on January $1,2025,$ is $$220,000,$ and its cost is $$192,000.$

The equipment has an economic life of $5$ years. Daylight depreciates all of its equipment on a straight$-$line basis.

Chambers set the annual rental to ensure a $4\%$ rate of return. Daylight's incremental borrowing rate is $5\%,$ and the implicit rate of the lessor is unknown.

Collectibility of lease payments by the lessor is probable.

$($Both the lessor and the lessee's accounting periods end on December $31.)$

Click here to view factor tables.

$($For calculation purposes, use $5$ decimal places as displayed in the factor table provided.$)$

$($a$)$

Discuss the nature of this lease to Chambers and Daylight.

The nature of this lease for Chambers is a$($n$)$ lease.

The nature of this lease for Daylight is a$($n$)$ lease.

Calculate the amount of the annual rental payment. $($Round answer to $0$ decimal places, eg$.5,275.)$

Annual rental payment $

Prepare all the necessary joumal entries for Chambers for $2025.($List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Round answers to $0$ decimal places, eg$.5,275.$ Record journal entries in the order presented in the problem.$)$

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