Please complete the entries 3 & 4 with the correct amounts. To ralse operating f

Question

Please complete the entries 3 & 4 with the correct amounts.

To ralse operating funds, Signal Aviation sold an airplane on January 1, 2018, to a finance company for $902,620. Signal Immediately leased the plane back for a 12-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $932,620. Its cost and its book value were $650,000. Its useful life is estimated to be 14 years. The lease requires Signal to make payments of $130,104 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 12%. 7.18 points Required: 1.&2. Prepare the appropriate entries for Signal on January 1, 2018 and December 31, 2018, to record the transaction and necessary adjustments. (Round your Intermedlate and final answers to the nearest whole dollar amount. If no entry Is requlred for a transactlon/event, select "No Journal entry required" In the first account field.) 0 Date eneral Journa Debit edit January 01 2018 902,620 Cash Note payable 902,620 January 01 2018 130,104 Note payable Cash 130,104 December 31 2018 92,702 3 Interest expense Interest payable 92,702 December 31 2018 64,473 4 Depreciation expense Accumulated depreciation 64,473 x

Explanation / Answer

Interest Expense = 932620*12% = 111914 (Rounded Off)

Depreciation = 650000/14 = 46429 (Rounded Off)

Depreciation is charged on cost.

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