Diablo Company Leased a Machine from Juniper Corporation on January

question 65

Essay

Diablo Company leased a machine from Juniper Corporation on January 1, 2009. The machine has a fair value of $20,000,000. The lease agreement calls 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%.
Other information:
PV of an ordinary annuity @10% for 4 periods: 3.16987
PV of an annuity due @ 10% for 4 periods: 3.4869
Required:
1. Determine the amount of each lease payment.
2. Prepare the journal entry for Diablo Company at the inception of the lease.
3. Prepare the journal entry for the first lease payment.
4. Prepare the journal entry for the second lease payment.

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Tax Losses

A financial situation where the expenses and deductions are greater than the income generated, potentially reducing taxable income in future periods.

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The funds raised by a company through the issuance of shares, representing the amount invested by shareholders.

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