Assume that on January 1, 2021, Kingbird Corporation sells equipment to Blossom Finance Co. for $1,700,000 and immediately leases back the equipment. The relevant information is as follows.

1.		The equipment was carried on Kingbirds books at a value of $1,500,000.
2.		The term of the non-cancelable lease is 3 years; title will not transfer to Kingbirds, and the expected residual value at the end of the lease is 1,125,000, all of which is unguaranteed.
3.		The lease agreement requires equal rental payments of $277,635 at the beginning of each year.
4.		The incremental borrowing rate for Kingbird is 6%. Kingbird is aware that Blossom Finance set the annual rental to ensure a rate of return of 6%.
5.		The equipment has a fair value of $1,700,000 on January 1, 2021, and an estimated economic life of 10 years

Prepare the journal entries for both the lessee and the lessor for 2021 to reflect the sale and leaseback agreement.

Date	Account Titles and Explanation	Debit	Credit
Kingbird Corporation (Seller-Lessee)
1/1/2112/31/21
	(To record sale)
1/1/2112/31/21
	(To record lease)
1/1/2112/31/21
	(To record first lease payment)
1/1/2112/31/21

Date	Account Titles and Explanation	Debit	Credit
Blossom Corporation (Buyer-Lessor)
1/1/2112/31/21
	(To record purchase)
1/1/2112/31/21
	(To record lease payments)
1/1/2112/31/21
	(To record lease revenue)
1/1/2112/31/21
	(To record depreciation)