Jefferson Financing, Inc. purchased a packing machine to lease to Puyallup Fruits. The lease qualifies as a direct financing lease and requires lease payments of $58,860 per year, payable in advance, over a ten-year period. There is no expected residual value. The fair market value of the packing machine is $330,000--the same amount paid by Jefferson to purchase the asset. The lease term begins on January 1, 2014.
Provide the journal entries required on Jefferson's books to:
(1) record the lease transaction and the first lease payment.
(2) recognize interest revenue at the end of the first year. Jefferson uses a calendar-year accounting period.
(Round all computations to the nearest dollar.)