On January 1, 2017, Nelson Co. leased a building to Wise Inc. The relevant information related to the lease is as follows:

The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,500,000 unguaranteed.

The leased building has a cost of $4,000,000 and was purchased for cash on December 31, 2016.

The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.

Lease payments are $275,000 per year and are made at the beginning of the year.

Wise has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Wise.

Both the lessor and lessee are on a calendar-year basis.

Use the information in the above scenario to prepare the 2018 journal entries for the LESSEE..