On 1 January 20X2, Supergrocery Inc. sold its major distribution facility, with a22-year remaining life, to a real estate investment trust (REIT) for $9,496,000cash, its estimated fair value. The facility had an original cost of $10,446,000and accumulated depreciation of $3,133,800on the date of sale.

Also on 1 January 20X2, Supergrocery signed a20-year lease agreement with the REIT, leasing the property back. Annual payments, beginning on 31 December 20X2, are $772,800. Supergrocery has an incremental borrowing rate of6%. The company uses straight-line depreciation and has a 31 December year-end. Supergrocery records a part-year's depreciation on buildings, based on the date of acquisition. There is an expected residual value at the end of the lease term of $84,000but this amount is not guaranteed. Round to the nearest percentage.(Do not round intermediate calculations. Round final answers to the nearest whole dollar amount.)

(PV of $1,PVA of $1, andPVAD of $1.)(Use appropriate factor(s) from the tables provided.)

Required:

1. Give the 20X2 entries that Supergrocery would make to record the sale and the lease.(If no entry is required for atransaction/event, select "No journal entry required" in the first account field.)

• 1
• Record the lease for the major distribution facility under a sale-leaseback.
• 2
• Record the interest expense for the period ending December 31, 20X2.
• 3
• Record the depreciation expense on leased distribution facility for the period ending December 31, 20X2.

2. Repeat requirement 1 assuming that Supergrocery has the option to repurchase the equipmenttenyears after the start of the lease for $7,996,000.(If no entry is required for atransaction/event, select "No journal entry required" in the first account field.)

• 1
• Record the gain or loss on sale and lease back.
• 2
• Record the commencement of lease