Logan Inc. manufactures a machine with an estimated life of 12 years and leases it to Quad Center for a period of 10 years. The normal selling price of the machine is $495,678 and its guaranteed residual value at the end of the non-cancelable leas term is estimated to be $15,000. The Quad Center will pay rents of $60,000 at the beginning of each year. Logan incurred costs of $300,000 in manufacturing the machine. Logan has determined that the collectability of the lease payments is probable and that the implicit interest is 5%. Assume Quad Center has an incremental borrowing rate of 5% and expects the value of the machine to be $10,000 at the end of the lease.

Required:

1. Prepare the journal entries for Quad Center for the first two years of the lease agreement
2. Prepare the journal entries for Logan for the first two years of the lease agreement