On January 1, 2020, Larkspur Co. leased a building to Crane Inc. The relevant information related to the lease is as follows.

1.		The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,700,000 (unguaranteed).
2.		The leased building has a cost of $4,200,000 and was purchased for cash on January 1, 2020.
3.		The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.
4.		Lease payments are $275,000 per year and are made at the beginning of the year.
5.		Crane has an incremental borrowing rate of 5%, and the rate implicit in the lease is unknown to Crane.
6.		Both the lessor and the lessee are on a calendar-year basis.

Prepare the journal entries that Crane should make in 2020

Prepare the journal entries that Crane should make in 2020. (Credit account titles are automatically indented when amount is entered. Do not ind the problem.) Date Account Titles and Explanation 1/1/20 Right-of-Use Asset 1/1/20 Lease Liability (To record the lease) Lease Liability Cash (To record lease payment) 12/31/20 Lease Expense Lease Liability Right-of-Use Asset Debit Credit $2,229,651 $2,229,651 $275,000 $275,000 $275,000 $163,517 $111,483