1. At the beginning of current year, ABC sold a building and immediately lease it back. The following data pertain to the sale and leaseback transaction:

Sale price at above fair value 9,000,000

Fair value of building 8,000,000

Carrying amount of building 7,200,000

Annual rental payable at the end of each year 600,000

Remaining life of building 20 years

Lease term 4 years

Implicit interest rate 12%

PV of an ordinary annuity of 1 at 12% for 4 periods 3.037

REQUIRED:

1.Gain on right of transferred to buyer lessor?

A.717,780

B.400,000

C.800,000

D.720,000

2. What is the cost of right of asset?

a.1,639,980

b.411,100

c.822,200

d.739,980

3.What is the initial lease liability?

a.1,000,000

b.1,200,000

c.2,400,000

d.1,822,200