-2 Homework Chapter 15 6 Help Save & Exit Submit Check my work 4 To raise operat
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-2 Homework Chapter 15 6 Help Save & Exit Submit Check my work 4 To raise operating funds, Signal Aviation sold an airplane on January 1, 2018, to a finance company for $1,150,000 Signal immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $1,180,000. Its cost and its book value were $790,000. Its useful life is estimated to be 15 years. The lease requires Signal to make payments of $153,490 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 11%. 7.5 oints 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 intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) eBook Hint Print References View transaction list Journal entry worksheet 2 4 Graw HillExplanation / Answer
1&2.
Date General Journal Debit Credit
January 1, 2018 Cash $ 1,150,000
Airplanes $ 790,000
Deferred gain on sale-leaseback $ 360,000
January 1, 2018 Leased airplane $ 1,150,000
Lease payable $ 1,150,000
January 1, 2018 Lease payable $ 153,490
Cash $ 153,490
December 31, 2018 Interest expense $ 109,616
Interest payable $ 109,616
December 31, 2018 Depreciation expense $ 76,667
Accumulated depreciation $ 76,667
December 31, 2018 Deferred gain on sale-leaseback $ 27,692
Depreciation expense $ 27,692
Explanation:
Interest expense = (11% x [$ 1,150,000 - $153,490]) = $ 109,616
Depreciation expense = ($ 1,150,000 / 15 years) = $ 76,667
Deferred gain on sale-leaseback = ($ 360,000 / 13 years) = $ 27,692
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