Sheridan Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $29,776 at the beginning of each year. The first payment is received on January 1, 2020. Sheridan had purchased the machine during 2019 for $136,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease.

(a) Compute the amount of the lease receivable.

Amount of the lease receivable

(b) Prepare all necessary journal entries for Sheridan for 2020