On 1 January 20X2 Grocers R Us entered into a lease to rent a mid-sized tractor trailer from TT Inc. with the following terms:
• The company will rent a tractor-trailer beginning 1 April 20X2 for a 4-year period. The fair value of the trailer is $280,000 and has a useful life of 7 years. The expected residual value is $77,000.
• Lease payments are due at the beginning of the year;
• The asset reverts to the lessor at the end of the lease term. The lessee does not have any residual value guarantees.
• TT’s incremental borrowing rate is 7.5%, the rate implicit in the lease is 8.5% (which is known to the lessee).

Required:
1. Calculate the lease payment.
2. Prepare the journal entries for the 20X2, 20X3, and 20X4 fiscal years.