Question
On January 1 year 1, superstar company leased a building to pzed Inc. The lease arrangement is for 20 years. The building is expected to
On January 1 year 1, superstar company leased a building to pzed Inc. The lease arrangement is for 20 years. The building is expected to have no residual value at the end of the lease. The leased building has a cost of $21,000,000 and was purchased for cash on January 1, year 1. 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. Superstar has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Pzed. Both the lessor and the lessee are on a calendar-year basis.
1) Prepare the journal entries that superstar company should make in 2 year 1
2) Prepare the journal entries that PZED should make in Year 1.
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