Diablo Company leased a machine from Juniper Corporation on January 1, 2011; the machine has a fair value of $20,000,000. The lease agreement call for four equal payments at the end of each year the useful life of the machine was expected to be four years with no residual value. The appropriate interest rate for this lease is 10%.
Additional Information
PV of an ordinary annuity @10% for 4 periods 3.16987
PV of an annuity @ 10% for 4 periods 3.4869
Required
Determine the amount of each lease payment
Prepare the journal entry for Diablo Company at the inception of the lease.
Prepare the journal entry for the first lease payment.
Prepare the journal entry for the second lease payment.