E21-8B (L02,4) EXCEL (Lessor Entries; Sales-Type Lease) Diamond Company, a machinery dealer, leased a machine to Turtle Corporation on January 1, 2017. The lease is for an 8-year period and requires equal annual payments of $63,807 at the beginning of each year. The first payment is received on January 1, 2017. Diamond had purchased the machine during 2016 for $376,000. Collectibility of lease payments by Diamond is probable. Diamond set the annual rental to ensure a 6% rate of return. The machine has an economic life of 9 years with no residual value and reverts to Diamond at the termination of the lease. Instructions (Round all numbers to the nearest dollar.)

(a) Compute the amount of the lease receivable (and show your work).

(b) Make all necessary journal entries for Diamond for 2017.

(c) Suppose the collectibility of the lease payments was not probable for Diamond. Make necessary journal entries for the company in 2017.

(d) Suppose at the end of the lease term, Diamond receives the asset and determines that it actually has a fair value of $5,000 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Diamond at the end of the lease term.