Standard Leasing leases equipment to a variety of businesses using the direct financing model. Standard earns interest under these arrangement at a 6% annual rate.
Standard leased a machine it purchased for $52,000 to Canterbury company, on January 1, 2011. The lease contract specified annual payments beginning January 1, year 11, the inception of the lease, and on 12/31/Year 11 and 12/31/Year 12. (It's a three-year lease term that runs through 12/31/Year 13. The payment are made in advance). Canterbury had the option to purchase the machine on December 30, Year 13, the end of the lease term, for $15,000, an amount that qualified as a bargain purchase amount.
In order for standard to recoup $52,000 and earn 6% on the lease, what did they compute as the annual lease payment (due 1/1/Year 11, 12/31/Year 11, and 12/31/Year 12)?