Bean county recently acquired a commercial office building at a cost of $20 million, paid in cash. it estimates that the economic life of the building is 40 years (with no salvage value) not requiring the entire building for its own use in the near-term, it leased-out four of its 10 floors to a private consulting firm. Annual rent was $800,000 per year and the term of the lease was 10 years. the county determined 6 percent was an appropriate discount rate to use in determining the present value of the anticipated rent receipts.

prepare any journal entries that the county should make to reflect the acquisition of the building and signing of the lease in its government-wide statements. assume for convenience that all rent payments will be made at the year-end.

prepare any journal entries that it should make upon collection of the first-year\'s rent

A key rationale for accounting for all leases as financing transactions is that the lessors, in economic substance "sells" the rights to use an asset for all or part of its useful life. how, therefore, can you justify not "derecognizing" that portion of the office building that will no longer be available for use by the county and correspondingly not recognizing an immediate gain (or loss) on the sale of such rights.