E$20\mathrm{.}17$B $($LO $3,4)($Accounting for an Operating Lease$)$ On January $1,2025,$ Fairfield Co$.$ leased a building to Fremantle Inc. The relevant information related to the lease is as follows.

The lease arrangement is for $20$ years. The building is expected to have a residual value at the end of the lease of $$10,000,000($unguaranteed$).$

The leased building has a cost of $$21,000,000$ and was purchased for cash on January $1,2025.$

The building is depreciated on a straight$-$line basis. Its estimated economic life is $50$ years with no salvage value.

Lease payments are $$1,778,000$ per year and are made at the beginning of the year.

Fairfield has an incremental borrowing rate of $8\%,$ and the rate implicit in the lease is unknown to Fremantle.

Both the lessor and the lessee are on a calendar$-$year basis.

Instructions

$($Round all numbers to the nearest dollar.$)$

a$.$ Prepare the journal entries that Fairfield should make in $2025.$

b$.$ Prepare the journal entries that Fremantle should make in $2025.$

c$.$ If Fremantle paid $$50,000$ to a real estate broker on January $1,2025,$ as a fee for finding the lessor, how much should Fremantle report as an expense for this item in $2025?$