Compute the amount of Merchants gain on the transaction.

Gain

Journal entry worksheet

Record the entry for the sale of the tractor.

Note: Enter debits before credits.

Date	General Journal

Journal entry worksheet

Record the entry for the leasing back of the tractor.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
01/01/20X1

On January 1. 20X1. Merchant Co. sold a tractor to Swanson Inc. and simultaneously leased it back for five years. The tractor's fair value is $300,000, but its carrying value on Merchant's books prior to the transaction was $200,000. The tractor has a seven-year remaining estimated useful life, and Merchant and Swanson both used 8% interest in evaluating the transaction. Merchant has agreed to make five payments of $57,976 beginning January 1, 20X1. Use tables (PV of 1. PVAD of 1, and PVOA of 1) (Use the approprlate factor(s) from the tables provided.) Required: 1. What type of a lease is this for Merchant? 2. Compute the amount of Merchant's gain on the transaction. 3. Prepare the January 1,201, entries on Merchant's books to account for the sale and leaseback