Luv Company enters into a non-cancelable lease agreement with Soap Company. The

Luv Company enters into a non-cancelable lease agreement with Soap Company. The details of the agreement are as follows:Inception dateJan 1 2011Annual lease payment at beginning of each year starting Jan 1 2011$18000Bargain-purchase option at the end of the lease$4000Lease term5 yearsEconomic life of leased equipment5 yearsLessors cost$60000Fair value of asset$70000Lessors implicit rate10%Lessees implicit rate10%Present value of annuity due i=10% n=5 periods4.16987Present value i=10% n=5 years0.621Soap company will receive the lease payments. The collectability of the lease payments is reasonably predictable and there are no uncertainties surrounding the costs to be incurred by Soap companythe lessor.