On December 31, 20x6, the Jimmy Corporation, an entity subject to ASPE, entered into lease-buyback arrangement with the George Finance Company to sell specialized production equipment. The equipment has an original cost of $2,300,000, accumulated depreciation of $850,000 and a fair value of $1,600,000. George advanced $1,600,000 to Jimmy, took ownership of the equipment and leased the equipment back to Jimmy. The term of the lease is 10 years and once Jimmy makes their last lease payment, the ownership of the equipment passes to Jimmy. The equipment had 13 years remaining on its useful life. There is no residual value expected at the end of the useful life. The rate implicit in the lease is 8%, which is known to Jimmy. Jimmy has a December 31 year-end. Required a. What is the annual lease payment as calculated by George? c. Prepare the journal entries for this lease for the years 20x6 and 20x7.