On January 1, 2018, Morris Company sells land to Lopez Corporation for $8,231,300, and immediately leases the land back. The following information relates to this transaction: 1. 2. 3. 4. 5. The term of the noncancelable lease is 21 years and the title transfers to Morris Company at the end of the lease term. The land has a cost basis of $6,720,600 to Morris. The lease agreement calls for equal rental payments of $755,700 at the beginning of each year. The land has a fair value of $8,196,100 on January 1, 2018 The incremental borrowing rate of Morris Company is 10%. Morris is aware that Lopez Corporation set the annual rentals to ensure a rate of return of 7%. Morris Company pays all executory costs which total $255,700 in 2018. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. 7. Prepare the journal entries for the entire year 2018 on the books of Morris Company to reflect the above sale and lease transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places e.g. 5,275.) Date Account Titles and Explanation AC Debit Credit January 1, 2018 Cash Land Unearned Profit an Sale-Leaseback # (To record sale) January 1, 2018 Leased Land (To record lease) Executory Costs Throughout 2018 Accounts Payable and Cash December 31, 2018 (To record amortization of profit on sale) December 31, 2018 (To record interest payment) Prepare the journal entries for the entire year 2018 on the books of Lopez Corporation to reflect the above purchase and lease transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to O decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit January 1, 2018 (To record purchase) January 1, 2018 (To record the leaseback) December 31, 2018