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On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $80,000

On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $80,000 each, beginning December 21, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on annual interest rate of 5%. Winn also paid a $100,000 advance payment at the beginning of the lease. With permission of the owner, Winn made a structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value.

1. Record journal entry for the lease payment for Winn on December 31, 2022.

1. Record journal entry for the lease payment for Winn on December 31, 2023.

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