On January 1 2015, Foley Company (as lessor) entered into a non-cancelable lease agreement with Pinkley Company for machinery which was carried on the accounting records of Foley at $6,795,000. Minimum lease payments under the lease agreement which expires on December 31, 2024 total $10,650,000. Payments of $1,065,000 are due each January 1. The first payment was made on Janury 1 2015 when the lease agreement was finalized. Pinkleys borrwing rate is 12% and Foleys implicit rate is 10% (known by Pinkley). The effective interest method of amortization is being used. Pinkley expects the machine to have a ten year life with no salvage value and be deprciated on a straight line basis. Collectabilty of the rentals is reasonably predictable, and there are no impotant uncertainties surrounding the costs yet to be incurred by the lessor.

A). What journal entries should be recorded by Pinkley company on january 1 2015?

B). What journal entries should be recorded by Foley company on January 1 2015?

C) What should be the income before income taxes derved by foley from the lease for the year ended December 31 2015?

D). Ignoring income taxes, what should be the expense incurred by Pinkley from this lease for the year ended December 31 2015?