The city of Morehead leased equipment. The life of the noncancellable lease is 10 years. Using an 8 percent interest rate, the present value of the lease payments is $905,861. The first payment of $125,000 is due when the lease begins, January 10, 2017. An additional payment is due on January 10th for each of the next 9 years. Prepare journal entries to record:

1. The long-term lease in the General Fund.

2. The first lease payment on January 10, 2017.

3. The second lease payment on January 10, 2018.

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