CHAPTER 15 Leases 913 Required 1. Prepare the appropriate entries for North American on (a) January 1.2016, to the sale leaseback and 31, 2016, to record record necessary adjustments. 2. Show how North American's December 31,2016, balance sheet and income statement would reflect the sale-leaseback P 15-21 On January 1, 2016, Cook Textiles leased a building with two acres of land from PeckDevelopment. The lease is Real estate lease for 10 years. No purchase option exists and the property will revert to Peck at the end of the lease. The building and and building and land combined have a fair market value on January 1, 2016, of $1,450,000 and the building has an estimated LO 15-10 life of 20 years with a residual value of S150,000. The lease calls for Cook to assume all costs of ownership and to make annual payments of S200,000 due at the beginning of each year. On January 1, 2016, the estimated value of the land was $400,000. Cook uses the straight-line method of depreciation and pays 10% interest on borrowed money. Peck's implicit rate is unknown. Required: 1. Prepare joumal entries for Cook Textiles for 2016. Assume the land could be leased without the building for $59,000 each year. 2. Assuming the land had a fair value on January 1, 2016, of s200,000 and could be leased alone for s30,000, prepare journal entries for Cook Textiles for 2016. Refer to the situation described in Problem 15-21 15-22 RS; real estate Required How might your solution differ if Textiles prepares its financial statements according to International Cook ase; land and Financial Reporting Standards? uilding L015-10