On January $1,2023,$ Sandhill Corporation sold equipment to Liquidity Finance Corp. for $$780,000$ and immediately leased the equipment back. Both Sandhill and Liquidity use ASPE. Other relevant information is as follows.

The equipment's carrying value on Sandhill's books on January $1,2023,$ is $$690\mathrm{.}000,$ with an original cost of $$980\mathrm{.}000\mathrm{.}00.$

The term of the non$-$cancellable lease is $10$ years. Title will transfer to Sandhill at the end of the lease

The lease agreement requires equal rental payments of $$126,941\mathrm{.}35$ at the end of each year.

The incremental borrowing rate of Sandhill is $12\%.$ Sandhill is aware that Liquidity set the annual rental to ensure a rate of return of $10\%.$

The equipment has a fair value of $$780,000$ on January $1,2023,$ and an estimated economic life of $10$ years, with no residual value.

Sandhill pays repairs and maintenance expenses of $$10,900$ per year directly to suppliers.

Click here to view the factor table PRESENT VALUE OF $1.$

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF $1.$

$($a$)$

Prepare the journal entries for both the lessee and theiessor for $2023$ to reflect the sale and leasehack agreement. No uncertainties exist and collectibility is reasonably certain. $($List all debit en tries before credlt entries. Credit occount tities are outomatically indented when the amount is entered. Do not indent manualll, If no entry is required, select $"$No Entry" for the account tities and enter o for the amounts. Record journal entries in the order presented in the problem. Round factor values to $5$ decimal plicces, es$.125124$ and final answers to $?$ decimal places, eg$.5,275\mathrm{.}25.)$

Sandhill Corporation$($Lessee$)$:

Date

Account Titles and Explanation

Debit

Credit $$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$|$To record sale of equinmont.$\}$

$$

$$

$($To record lease back of equipment.$)$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$($To record amortization of deferred profit$)$

$$

$$

$($To record depreciation expense.$)$

$$

$$

$$

$$

$$

$($To record lease payment.$)$

Date

Account Titles and Explanation

Debit

Credit

$$

$($To record leaseback of equipiment.$)$

$$

$$

$($Collectiurr of iease prament$)$

$$

$$

$($To record interest.$)$