Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $104,000. Manufacturers Southern's fiscal year ends December 31. Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $18,200 at the beginning of each period Economic life of asset 2 years Fair value of asset $135,990 Implicit interest rate 8%

Required: 1. Show how International Machines determined the $18,200 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2018, and the second lease payment on April 1, 2018.