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.

---

Definitions:

Grapevine

An informal channel of communication within an organization, often characterized by the spread of rumors or unofficial information.

News Accounts

Reports or descriptions of recent events or facts, presented in newspapers, broadcasts, or online media.

Positive Impact

An effect or outcome that is beneficial or contributes positively to a situation or individual.

Enthusiastic Audience

A group of spectators or listeners who are highly interested and express excitement about the content presented to them.