Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $85,000. Manufacturers Southern's fiscal year ends December 31. Related Information:
Lease term 2 years (8 quarterly periods)
Quarterly rental payments $16,700 at the beginning of each period
Economic life of asset 2 years
Fair value of asset $124,782
Implicit interest rate 8%

Required:
a. Show how International Machines determined the $16,700 quarterly lease payments.
b. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.