Bingham Smelting Company entered into a 15-year noncancelable lease beginning January 1, 2011, for equipment to use in its smelting operations. The term of the lease is the same as the expected economic life of the equipment. Bingham uses straight-line depreciation for all plant assets. The provisions of the lease call for annual payments of $290,000 in advance plus $20,000 per year to cover executor costs, such as taxes and insurance, for the 15-year period of the lease. At the end of the 15 years, the equipment is expected to be scrapped. The incremental borrowing rate of Bingham is 10%. The lessor’s computed implicit interest rate is unknown to Bingham.

Record the lease on the books of Bingham and give all the entries necessary to record the lease for its first year plus the entry to record the second lease payment on December 31, 2011.