QUESTION 8 To raise operating funds, Signal Aviation sold an airplane on January 1, 2016, to a finance company for $820,000 Signal immediately leased the plane back for a 13 year period, at which time ownership of the airplane will transfer to Signal The airplane has a fair value of $850,000 Its cost and its book value were $645,000 Its useful life is estimated to be 15 years The lease requires Signal to make payments of $104,944 to the finance company each January 1 Signal depreciates assets on a straight line basis The lease has an implicit rate of 10 Assume Signal Aviation prepares its financial statements according to International Financial Reporting Standards Required 1 2 Prepare the appropriate entries for Signal on January 1, 2016 and December 31, 2016 , to record the sale leaseback and necessary adjustments (If no entry is required for a transaction event, select No journal entry required in the first account field ) 1 Record the sale of the airplane 2 Record the lease 3 Record the cash payment 4 Record accrued interest 5 Record the depreciation expense 6 Record adjustment for the gain QUESTION 9 On January 1, 2016, Cook Textiles leased a building with two acres of land from Peck Development The lease is for 10 years at which time Cook has an option to purchase the property for $200,000 The building has an estimated life of 20 years with a residual value of $170,000 The lease calls for Cook to assume all costs of ownership and to make annual payments of $340,000 due at the beginning of each year On January 1, 2016, the estimated value of the land was $600,000 Cook uses the straight line method of depreciation and pays 12 interest on borrowed money Peck's implicit rate is unknown FV of $1 , PV of $1 , FVA of $1 , PVA of $1 , FVAD of $1 and PVAD of $1 ) (Use appropriate factor(s) from the tables provided ) Required Prepare Cook Company's journal entries related to the lease in 2016 (If no entry is required for a transaction event, select No journal entry required in the first account field ) 1 Record the lease 2 Record the cash payment 3 Record the depreciation expense 4 Record accrued interest

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 22, 2024

QUESTION 8: To raise operating funds, Signal Aviation sold an airplane on January 1, 2016, to a finance company for $820,000. Signal immediately leased the

QUESTION 8:

To raise operating funds, Signal Aviation sold an airplane on January 1, 2016, to a finance company for $820,000. Signal immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $850,000. Its cost and its book value were $645,000. Its useful life is estimated to be 15 years. The lease requires Signal to make payments of $104,944 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 10%. Assume Signal Aviation prepares its financial statements according to International Financial Reporting Standards.

Required:

1.&2.

Prepare the appropriate entries for Signal on January 1, 2016 and December 31, 2016, to record the sale-leaseback and necessary adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the sale of the airplane.

Record the lease.

Record the cash payment.

Record accrued interest.

Record the depreciation expense.

Record adjustment for the gain.

QUESTION 9:

On January 1, 2016, Cook Textiles leased a building with two acres of land from Peck Development. The lease is for 10 years at which time Cook has an option to purchase the property for $200,000. The building has an estimated life of 20 years with a residual value of $170,000. The lease calls for Cook to assume all costs of ownership and to make annual payments of $340,000 due at the beginning of each year. On January 1, 2016, the estimated value of the land was $600,000. Cook uses the straight-line method of depreciation and pays 12% interest on borrowed money. Peck's implicit rate is unknown. FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

Prepare Cook Company's journal entries related to the lease in 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)