Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $85,000. Manufacturers Southern's fiscal year ends December 31.

Related Information:

Lease term ...................................... 2 years (8 quarterly periods)

Quarterly rental payments ...... $15,000 at the beginning of each period

Economic life of asset .................................................. 2 years

Fair value of asset .................................................... $112,080

Implicit interest rate .......................................................... 8%

Required:

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

2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2018, and the second lease payment on April 1, 2018?