Question 23 Assume that on January 1, 2021, Metlock Corporation sells equipment to Ivanhoe Finance Co. for $1,870,000 and immediately leases back the equipment. The relevant information is as follows. 1. The equipment was carried on Metlocks books at a value of $1,650,000. 2. The term of the non-cancelable lease is 3 years; title will not transfer to Metlocks, and the expected residual value at the end of the lease is 1,237,500, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $305,395 at the beginning of each year. 4. The incremental borrowing rate for Metlock is 9%. Metlock is aware that Ivanhoe Finance set the annual rental to ensure a rate of return of 9%. 5. The equipment has a fair value of $1,870,000 on January 1, 2021, and an estimated economic life of 10 years. Click here to view factor tables. Prepare the journal entries for both the lessee and the lessor for 2021 to reflect the sale and leaseback agreement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Debit Credit Date Account Titles and Explanation Metlock Corporation (Seller-Lessee) (To record sale) (To record lease) (To record first lease payment) Debit Credit Date Account Titles and Explanation Ivanhoe Corporation (Buyer-Lessor) (To record purchase)