Prepare the journal entries that Teal Mountain should make in 2020.

On January 1, 2020, Teal Mountain Co. leased a building to Sandhill 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 $3,700,000 (unguaranteed). The leased building has a cost of $4,200,000 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 $275,000 per year and are made at the beginning of the year. Sandhill has an incremental borrowing rate of 6%, and the rate implicit in the lease is unknown to Sandhill. Both the lessor and the lessee are on a calendar-year basis. 4. 5. 6