Question - On January 1, 2017, Windsor Co. leased a building to Sheridan Inc. The relevant information related to the lease is as follows.
1. The lease arrangement is for 10 years.
2. The leased building cost $4,570,000 and was purchased for cash on January 1, 2017.
3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.
4. Lease payments are $254,500 per year and are made at the end of the year.
5. Property tax expense of $85,100 and insurance expense of $10,900 on the building were incurred by Windsor in the first year. Payment on these two items was made at the end of the year.
6. Both the lessor and the lessee are on a calendar-year basis.
(a) Prepare the journal entries that Windsor Co. should make in 2017.
(b) Prepare the journal entries that Sheridan Inc. should make in 2017.
(c) If Windsor paid $30,800 to a real estate broker on January 1, 2017, as a fee for finding the lessee, how much should Windsor Co. report as an expense for this item in 2017?