On January 1, 2017, Hester Co. sells machinery to Beck Corp. at its fair value of 480,000 and leases it back. The machinery had a carrying value of 420,000, the lease is for 10 years and the implicit rate is 10%. The lease payments of 71,000 start on January 1, 2017. Hester uses straight-line depreciation and there is no residual value.

Instructions:

Prepare all of Hester's entries for 20

Prepare all of Hester's entries for 2017.

Hester Co. (Lessee)
January 1, 2017
Cash
Machinery
Unearned Profit on Sale-Leaseback
Leased Machinery
Lease Liability

Lease Liability
Cash
December 31, 2017
Depreciation Expense
Accumulated Depreciation--Capital Lease
Unearned Profit on Sale- Leaseback

Depreciation Expense

Interest Expense

Interest Payable