To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $820,000 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 $820,000 and a book value of $660,000 (its original cost was $1 million). The rental payments of $120,000 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.)
To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $820,000 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 $820,000 and a book value of $660,000 (its original cost was $1 million). The rental payments of $120,000 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.)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $820,000 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 $820,000 and a book value of $660,000 (its original cost was $1 million). The rental payments of $120,000 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.)
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