Assume that on January $1,2025,$ Blue Corporation sells equipment to Blossom Finance Co$.$ for $$1,770,000$ and immediately leases back the equipment. The relevant information is as follows.

The equipment was carried on Blue's books at a value of $$1,560,000.$

The term of the non$-$cancelable lease is $3$ years; title will not transfer to Blue, and the expected residual value at the end of the lease is $$117,000,$ all of which is unguaranteed.

The lease agreement requires equal rental payments of $$288,740$ at the beginning of each year.

The incremental borrowing rate for Blue is $6\%.$ Blue is aware that Blossom Finance set the annual rental to ensure a rate of return of $6\%.$

The equipment has a fair value of $$1,770,000$ on January $1,2025,$ an estimated economic life of $10$ years and will be depreciated using the straight$-$line method.

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Prepare the journal entries for both the lessee and the lessor for $2025$ to reflect the sale and leaseback agreement. $($Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Round present value factor calculations to $5$ decimal places, eg$.1\mathrm{.}25124$ and the final answer to $0$ decimal places e$.$g$.5,275.)$

Date

Account Titles and Explanation

Debit

Blue Corporation $($Seller$-$Lessee$)$

$$

$$

$$

$($To record sale$)$

$$

$$

$($To record lease$)$