On January 1, 2020, Larkspur Co. leased a building to Crane Inc. The relevant information related to the lease is as follows. 1. 2. 3. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,400,000 (unguaranteed). The leased building has a cost of $3,900,000 and was purchased for cash on January 1, 2020. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. Lease payments are $250,000 per year and are made at the beginning of the year. Crane has an incremental borrowing rate of 6%, and the rate implicit in the lease is unknown to Crane. Both the lessor and the lessee are on a calendar-year basis. 4. 5. 6. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Your answer is partially correct. Try again. Prepare the journal entries that Larkspur should make in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Debit Credit 1/1/20 39000007 Account Titles and Explanation Buildings Cash (To record cost of the building) Cash 3900000 1/1/20 250000 250000 Unearned Lease Revenul T (To record receipt of lease payment) PL Tunearned Lease Revenue 2/31/20 25000011 250000 T Lease Revenue (To record the recognition of the revenue each period) 12/31/20 Depreciation Expense 78000 780001 T Accumulated Depreciati (To record depreciation expense on the leased asset) Prepare the journal entries that Crane should make in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment)