G H 8 9 10 D 1 Problem 11. 2 Sellco was in need of cash. Its solution: sell a warehouse to Buyco for $4,000,000 (the fair market value) 3 and then lease back the warehouse from Buyco to continue using it. The amortized cost of the warehouse 4 to Sellco was $3,000,000 (cost of 5,000,000 less accumulated depreciation of $2,000,000). The s warehouse has a remaining useful life of 15 and is expected to have a residual value of $1,000,000 at the 6 end of the lease 7 The lease term is for 10 years. Buyco's implicit rate is 12%/year and this rate is known by Sellco. The lease payment is 581,208/year with the first payment due at the inception of the lease (which was 1/1/2020). The remaining payments are due at 12/31 each year. 11 Required 12 1. Prepare Sellco's entries on 1/1/2020 to record the transaction. 13 14 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box. 15 Entries by Selice on 1/1/2020: 16 Account Debit Credit 1 1 20 1 21 1 17 18 19 22 1 1 24 25 26 2. Redo l assuming that the warehouse is expected to have a residual value of $1,500,000 27 (unguaranteed) at the end of the lease and the lease payment is $555,768. 28 29 Enter your entries below. Choose the account from the drop-down list in the yellow cell. Enter the amount of the entry in the green box 30 Entries by Sellco on 1/1/2020: 31 32 Account Debit Credit 2 33 34 2 2 35 36 2 2 37 2 38 39 40 E D E F A G 1 Columni 2 Accumulated lepreciation (Bal. Sht) 3 Cash (Bal. Sht 4 Deferred rent revenue (Bal. Sht) 5 Equipment (B I Sht) 6 Lease payable (Bal. Sht) 7 Lease receivaille (Bal. Sht) 8 Note payable Bal. Sht) 9 Prepaid servich contract (Bal. Sht) 10 Right-of-Use a set (Bal. Sht) 11 Warehouse (ebl. Sht) 12 Amortization xpense (Inc. Stmt) 13 Cost of goods old (Inc. Stmt) 14 Gain on sale of warehouse (Inc. Stmt) 15 Interest experbe (Inc. Stmt) 16 Interest revenue (Inc. Stmt) 17 Lease expense (Inc. Stmt) 18 Lease revenu (inc. Stmt) 19 Misc. expense (Inc. Stmt) 20 Rent revenue Inc. Stmt) 21 Sales revenue inc. Stmt) 22 23 24 25 26 27 28 29