The Herbertson Company leases machines to clients. Annual rentals are paid each year, with the first

The Herbertson Company leases machines to clients. Annual rentals are paid each year, with the first payment due on the day the lease begins. A machine with a book value of $10,000 is leased. Unguaranteed salvage value is $1,000. Lease term is five years. Herbertson’s interest rate is 5%. What is the annual lease payment?On January 1, 2016, The Hammel Company (lessee) entered into a five-year, noncancelable lease for a machine with payments of $25,981.62 due each January 1. The first payment is due January 1, 2016. The McMillan Company (lessor) has a 10% interest rate known by Hammel.Fair Value and book value of machine: $100,000Property Taxes included in annual $25,981.62 payments $2,000No renewal options. No salvage valueStraight line depreciation used by both lessee and lessor.Economic life of the asset is 5 years.McMillan’s 2016 Interest Revenue will be: