The City of Clear Lake signed a lease agreement with Mountainside Builders whereby Mountainside will construct a new office building for city administrative use and lease it to the City for 30 years. The City has agreed to make an initial payment of $1,781,954 and annual payments in the same amount for the next 29 years. At a 6 percent discount rate, the present value of the lease payments totals $26 million. Upon completion, the building had an appraised value of $14 million and an estimated useful life of 40 years. Required

Provide the journal entries the city should make in both the capital projects fund general journal and the governmental activities general journal to record the lease at the date of inception.