Calculate and book journal entries for the following situation. Explain calculations.

General information about ABC Company:

Incremental borrowing rate 5.0%

Number of common shares authorized 590,000

Number of common shares issued and outstanding as of the end of last year 59,000

Par value of common stock $0.05

Tax rate 20%

At the start of the year, ABC company entered a 10-year lease for a warehouse. Rental payments of $70,000 are due at the start of the lease and December 31 of every year thereafter until a total of 10 payments have been made. The fair value of the warehouse at the start of the lease is $569,389. The warehouse is expected to have an economic life of 12 years and a residual value of $5,000. ABC's rental agreement guarantees a residual value of $8,000.

ABC company uses straight-line depreciation for all tangible assets. There are no renewal or purchase options in the lease, and the warehouse will still belong to the original owner at the end of the lease period. The company did not make any entries related to the lease except for the payments, which were improperly debited to prepaid lease expense.