Question - On January 1, 2016, Cook Textiles leased a building with two acres of land from Peck Development. The lease is for 10 years at which time Cook has an option to purchase the property for $110,000. The building has an estimated life of 20 years with a residual value of $152,000. The lease calls for Cook to assume all costs of ownership and to make annual payments of $220,000 due at the beginning of each year. On January 1, 2016, the estimated value of the land was $420,000. Cook uses the straight-line method of depreciation and pays 9% interest on borrowed money. Peck's implicit rate is unknown. FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required: Prepare Cook Company's journal entries related to the lease in 2016.