Note that the question asks for the lessor's (HVAC Leasing) perspective. On January 1, 2018, Winn Heat Transfer leased office space under a three year operating lease agreement. The arrangement specified three annual rent payments of $75,000 each, beginning December 31, 2018, and at each December 31 through 2020. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 7%. Winn paid a $330,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $405,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value.

Required:

Prepare the appropriate entries for HVAC Leasing from the beginning of the lease through the end of 2020. Winns fiscal year is the calendar year.