Question

To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $900,000 and immediately leased the building back. The operating lease is for the final 10 years of the building's estimated 20- year remaining useful life. The building has a fair value of $900,000 and a book value of $700,000 (its original cost was $1 million). The rental payments of $200,000 are payable to the insurance company each December 31. The lease has an implicit rate of 8%. (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: 1. & 2. Prepare the appropriate entries for National Distribution Center on January 1, 2021 and December 31, 2021, to record the sale- leaseback and necessary adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 3 4 Record the beginning of the lease for National. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021

Answer 1

Anseven Page. No o €2) Dep ortes entrier on Tamil, 2021 and dec 31, 2014 On Jan 1, 2001, cash = $900,000 Accumulated depreciation - Original conf - Book value = $1000,000 – $700,000 = $ 300,000 Building cost = $1000,000 Deberred gain on sale leaseback - $900,000 + $ 300,000 – $1000,000 = $200,000 On dec 31, 2021, Rent expense = $200,000 Detevred gain on sale lease back orecognized 200.000 . 70 yeasno $20,000 =

Page No @ Credit Dale Jani, 30 31 Particular I Debit Cash $900,000 Accumulated depreciation $300,000 Building Deberred gain on sale leaseback $ 1000,000 $ 200,000 Dec31, 2021 $200,000 Rent expense Cash $ 200,000 $20,000 Dec 31, Deferred gain on sale leaseback 2021 Rent expense $20,000