JMK owns a distribution factory that it uses to store its inventory. On 1 January 20X7, the factory was sold to a large REIT for $8,700,000. The factory had an original cost of $16,000,000 and accumulated depreciation of $6,400,000 on the date of sale. As part of the agreement, the building was leased back to JMK.
The lease has a 10-year term and required payments on 1 January of each year. The payments are $450,000 with no transfer of title or purchase option. JMK will pay all of the building’s operating and maintenance costs including property taxes and insurance. JMK’s incremental borrowing rate is 7.5%. The building is being depreciated straight-line.

Required:
1. Prepare entries for JMK to record the sale and leaseback of the building.
2. Prepare the journal entries for 20X7.
3. Show how all amounts related to the sale and leaseback will be presented on the statement of financial position and statement of comprehensive income in 20X7.