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Buffalo Corporation owned a manufacturing facility. Buffalo had purchased the building for $11,400,000, and had recorded $5,040,000 depreciation on the facility. On January 1, 2020,
Buffalo Corporation owned a manufacturing facility. Buffalo had purchased the building for $11,400,000, and had recorded $5,040,000 depreciation on the facility. On January 1, 2020, Buffalo sold the building to HMD Ltd. for $7,416,000, and then immediately signed a 35-year agreement to lease back the building for annual payments of $699,057, due at the start of each year. Title to the building would return to Buffalo at the conclusion of the lease. HMD's implied interest rate, which was known to Buffalo, was 10%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare the journal entries to be recorded by Buffalo for the 2020 fiscal year (assuming a December 31 year-end, and that Buffalo follows ASPE). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. Round factor values to 5 decimal places, e.g. 1.25124. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020 (To record sale of building.) Prepare the journal entries to be recorded by Buffalo for the 2020 fiscal year (assuming a December 31 year-end, and that Buffalo follows ASPE). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. Round factor values to 5 decimal places, e.g. 1.25124. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020 (To record sale of building.) (To record inception of lease.) (To record lease payment.) Dec. 31, 2020 (To record depreciation expense.) (To record amortization of deferred gross profit.) (To record interest.) Buffalo Corporation owned a manufacturing facility. Buffalo had purchased the building for $11,400,000, and had recorded $5,040,000 depreciation on the facility. On January 1, 2020, Buffalo sold the building to HMD Ltd. for $7,416,000, and then immediately signed a 35-year agreement to lease back the building for annual payments of $699,057, due at the start of each year. Title to the building would return to Buffalo at the conclusion of the lease. HMD's implied interest rate, which was known to Buffalo, was 10%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare the journal entries to be recorded by Buffalo for the 2020 fiscal year (assuming a December 31 year-end, and that Buffalo follows ASPE). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. Round factor values to 5 decimal places, e.g. 1.25124. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020 (To record sale of building.) Prepare the journal entries to be recorded by Buffalo for the 2020 fiscal year (assuming a December 31 year-end, and that Buffalo follows ASPE). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. Round factor values to 5 decimal places, e.g. 1.25124. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020 (To record sale of building.) (To record inception of lease.) (To record lease payment.) Dec. 31, 2020 (To record depreciation expense.) (To record amortization of deferred gross profit.) (To record interest.)
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