On January 1,2011,Granite Company Entered a Lease to Rent Office

question 28

Essay

On January 1,2011,Granite Company entered a lease to rent office space.The lease requires $350,000 per year,at the beginning of each year,for 20 years.The lease is non-cancellable and non-renewable.The building's estimated useful life is 30 years,and its current fair value is estimated to be $6 million.The incremental borrowing rate is 5%.
Requirement:
Classify this lease and record the journal entries for the first year of the lease.

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Definitions:

Trade Secret

Confidential business information that provides an enterprise with a competitive edge, and is protected by secrecy measures rather than formal intellectual property rights.

Intangible Item

An asset or resource that lacks physical substance but holds value, such as intellectual property or goodwill.

Time Limit

A specified period within which an action must be completed or a task must be achieved.

Innovator's Imperative

The necessity for creators, inventors, and businesses to continuously innovate in order to stay competitive and meet evolving market demands.