Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $280,000, beginning immediately. The residual value of $200,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $120,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $1,800,000 at the commencement of the lease. Note: Round your answers to the nearest whole dollar. Date Account Name 1) Dec. 31 Lease Receivable Cost of Goods Sold Sales Revenue Inventory To derecognize asset and record investment in lease 2) Dec. 31 Cash Lease Receivable To record receipt of lease payment Dr. Cr. 2,240,000 1,800,000 0 1,788,365 x 1,800,000 280,000 0 0 280,000