Question diablo company lessee leased a machine from

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Question :

Diablo Company (lessee) leased a machine from Juniper Corporation (lessor) on 1st January, 2013. The machine has a fair value of $20,000,000. The lease agreement calls for four equal payments at the end of year in the amount of $6,309,410. 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%. The ownership of the machine reverts to Diablo at the end of the lease. Both Diablo and Juniper use the straight-line method for depreciation.

Required:

a. Purpose the journal entry for Diablo Company at the inception of the lease on 1st January, 2013.

b. Purpose the journal entries or entry for Diablo Company on 31st December, 2013 with respect to the lease and the leased asset.

c. Purpose the journal entry or entries for Diablo Company on 31st December, 2014 with respect to the lease and the leased asset.

Reference no: EM13350165

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