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

The equipment s carrying value on Bandhills bocks on January $1,2023$ is $$690,000,$ with arn original cost of $$980,000,00.$

The term ol the non$-$cancellablc lcase is $10$ years. I tle will transfer to Sandhill at the end of the lease.

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

The incremental borrowing rate of Sandhill is $12\%.$ Sandhill is oware that Liouidity 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 expensec of $$10,900$ per wear directly to suppliers.

Click here to view the factor table PRESENT VAL UE OF $1$

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

$($a$)$

Prepare the journal entries for both the lessee and the lessur for $2023$ to reflect the sale and leaseback agreement. No uncertainties exist and collectibility is reasonably certain. $($List ail debit entries before creditentries. Credit account titles are outomatically indented when the omount is entered. Do not indent manualk, If no entry is required, select No Entry' for the account titles and enter $0$ for the umounts. Record journal entries in the order presented in the problem. Round foctor values to $5$ decimal places, e$8,1\mathrm{.}25124$ and final answers to $2$ decimal places, eg$.5\mathrm{.}275\mathrm{.}25\mathrm{.}1$

Sandhill Corporation$($Lessee$)$:

Date

Account Titles and Explanation

Debit

Credit

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

$$

$$

$$

$$

$$

$$

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

$$

$$

$($To record depreciatiar expensc.$)$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

Torecord lease twack of equipment$)$

$$

$$

$$

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

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$$

$($To record lease payment.$)$