Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1 of the current year. The lease agreement for the $6,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwicks implicit interest rate was 9%.

Required:

Determine the amount of each lease payment using Excel's PMT function.

Prepare the journal entry for Davidson, Incorporated at the beginning of the lease.

Prepare an amortization schedule for the 4-year term of the lease.

Record the first lease payment on December 31.

Record the amortization of right-of-use asset on December 31.

Indicate the amounts related to the lease reported on the year-end balance sheets and income statements.