Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2024. International Machines manufactured the equipment at a cost of $85,000. Manufacturers Southern’s fiscal year ends December 31.

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, 2024, and the second lease payment on April 1, 2024.

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Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate 2 years (8 quarterly periods) $15,000 at the beginning of each period 2 years $112,080 8%