Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2011. International Machines manufactured the equipment at a cost of $85,000.

Required:

1. Show how International Machines determined the $15,000 quarterly rental payments.

2. Prepare appropriate entries for International Machines to record the lease at its inception, January 1, 2011, and the second rental payment on April 1, 2011.