XYZ Corporation leased a machine to ABC Inc. on 1/1/2014. The lease is for an 8-year, 11% rate of return that requires equal annual payments of $70,026 at the beginning of each year. The first annual payment is received on 1/1/2014. XYZ Corporation had purchased the machine during 2013 for $320,000. The machine has an economic life of 10 years with no residual value and it reverts back to XYZ at the termination of the lease.

Instructions:

a. Compute the amount of the lease receivable to be recorded by XYZ Corporation.

b. Prepare all necessary journal entries for XYZ Corporation