Prepare the journal entry for the first year of the lease

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Question - On January 1, 2019, A Brunch of Fun (lessor) entered a lease to rent out office space. The lease requires the lessee to pay A Brunch of Fun $200,000 per year, at the beginning of each year, for 10 years. The lease is non-cancellable and non-renewable. The land and building's cost and current fair value is $5 million, with $2 million allocated to the land and $3 million to the building. The building's estimated residual value at the end of its 30-year useful life is $0. The interest rate implicit in the lease is 10%.

Prepare the journal entry for the first year of the lease for the lessor. Assume that the assets have already been capitalized. Enter a debit as positive, a credit as negative. For any accounts that are not applicable, enter a 0.

Reference no: EM133038837

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