can someone please explain how they got this solution in detail

A18-18 ASPE; Sale and Leaseback: Central Purchasing Ltd. (CPL) owns the building it uses; it had an original cost of $8,000,000 and accumulated deprecia- tion of $2,400,000 as of 1 January 20X2. On this date, the building (but not the land) was sold to a real estate investment trust (REIT) for $7,500,000, which also was the building's fair value, and simultaneously leased back to CPL. Chapter 18 Leases 1311 The lease has a 15-year term and required payments on 31 December of each year. The payments are $855,000 with no transfer of title or bargain purchase option. CPL will pay all of the building's operating and maintenance costs includ- ing property taxes and insurance. CPL's incremental borrowing rate is 8%. There is no guaranteed residual value. The building is being depreciated straight-line with a full year's depreciation in the year of acquisition Required: 1. Determine whether the lease qualifies as a finance lease or an operating lease. 2. Record all journal entries for the 20X2 fiscal year. Interest expense Assignment 18-18 To determine if the lease qualifies as a finance lease, it must meet one of the following tests: Test Yes/No Explanation Is it likely that the lessee will obtain No There is no transfer of title or ownership of the leased property at the bargain purchase option end of the lease Will the lessee receivable substantially Uncertain Since the asset is only 30% all of the economic benefits of the depreciated at the time of the sale, building? the 15 year lease could well be a major part of the economic life of the building. Is the lessor assured of recovering the Yes The PV of the lease payments is investment in the leased property plus $7,318,354 which is more than a return on the investment over the 90% of the sales price of the lease term? building. Since at least one of the guidelines for classifying the lease as a capital lease appears to be met. the lease should be recorded as a capital lease. As a result, the gain must be deferred and amortized over the 15-year lease term Jan 1 2002: Cash...... .............. 7.500.000 Accumulated depreciation, building ..................................... 2.400,000 Building - 8,000,000 Deferred gain on sale and leaseback - building.. 1.900.000 ..... 7.318,354 7.318,354 Building under capital lease.. . Lease liability... Dec 31, 2002 Interest expense (7,318,354 x 8%).. Lease liability... 585,468 585,468 855.000 Lease liability............. Cash.......... . 855,000