Prepare the report for your partner regarding the financial implications from your review of the 2 files. Prepare any journal entries in the appendix if necessary and also include any applicable note disclosures as part of your recommendation. For Marathon Ltd., prepare a revised income statement that reflects your recommendation for any applicable adjustments.

On January 1, 2021, the company leased its administrative building under a contract wherein the company will obtain ownership of the building at the end of the 20-year lease for a nominal amount. Management decided to expense the lease payment of $3,000,000 for 2021 (paid on January 1, 2021). The building would have been capitalized at $30 million if treated as a capital lease. The building has a remaining economic life of 25 years. The interest for 2021 would have amounted to $2.45 million