Diablo Company leased a machine from Juniper Corporation on January 1, 2013. The machine has a fair value of $20,000,000. The lease agreement calls for four equal payments at the end of each year in the amount of $6,309,410. The useful life of the machine was expected to be four years with no residual value. The appropriate interest rate for the lease is 10%
Required:
1. Prepare the journal entry for Diablo Company at the inception of the lease
2. Prepare the journal entry for the first lease payment
3. Prepare the journal entry for the second lease payment