American Food Services, Incorporated leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2024. The lease agreement for the $5.5 million (fair value and present value of the lease payments) machine specified 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. Barton and Bartons implicit interest rate was 11%.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2024.

2. Prepare an amortization schedule for the four-year term of the lease.

3. & 4. Prepare the appropriate entries related to the lease on December 31, 2024 and 2026.