Diablo Company leased a machine from Juniper Corporation on January 1, 2011

Diablo Company leased a machine from Juniper Corporation on January 1, 2011; the machine has a fair value of $20,000,000. The lease agreement call 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%.

Additional Information

PV of an ordinary annuity @10% for 4 periods    3.16987

PV of an annuity @ 10% for 4 periods          3.4869

Required

Determine the amount of each lease payment

Prepare the journal entry for Diablo Company at the inception of the lease.

Prepare the journal entry for the first lease payment.

Prepare the journal entry for the second lease payment.