Capital Consultants owns the building it uses; it had an original cost of $755,000 and a net book value of $480,000 as of January 1, 2017. On this date, the building was sold to the Royal Leasing Company for $505,000 and simultaneously leased back to Capital Consultants.

The lease has a guaranteed, 4-year term and required payments on December 31 of each year. The payments are $173,500, and the lease allows the property to revert to the lessee at the end of the lease. Capital Consultants could have mortgaged this property under similar terms at an interest rate of 12%. The Royal Leasing Company will pay property taxes of $7,000 per year. These costs are included in the lease payment. Capital Consultants will pay maintenance and operating costs. The building is being depreciated straight line over its remaining 4-year life. Please make sure your final answer(s) are accurate to 2 decimal places.

a) Calculate the NPV (net present value) of the lease payments

b) Prepare the lessee's lease amortization schedule

c) Prepare the journal entries to record the sale and leaseback

d) Prepare the lease payment and the lessee's year end adjusting journal entries for 2017