On January 1, 2017, Fairfield Co. leased a building to Fremantle Inc. The lease arrangement is for 20 years. Both lessee and lessor record the lease as an operating lease. The leased building has a cost of $21,000,000 and was purchased for cash on January 1, 2017. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. Lease payments are $1,778,000 per year and are made at the beginning of the year. Fairfield has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Fremantle. Both the lessor and the lessee are on a calendar-year basis.

1) Prepare the journal entries that Fairfield should make in 2017.

2) Prepare the journal entries that Fremantle should make in 2017.

Please show your calculations.