Rawl Corporation sold a building to a bank at the beginning of 2017 at a gain of $88,500 and immediately leased the building back for a period of four years. The lease is accounted for as an operating lease. The book value of building (net) is $518,000.

Assume that a U.S.based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.

Required:

1. Prepare journal entries for this sale and leaseback for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.

- Record the entry for the sale of the building as per U.S. GAAP.

- Record the entry for gain recognition as per U.S. GAAP.

- Record the entry for the sale of the building as per IFRS.

- Record the entry for gain recognition as per IFRS.

2. Prepare the entry(ies) that Rawl would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.

- Record the entry for deferring gain on sale of building which was previously recognized in Profit and loss account due to conversion from U.S. GAAP to IFRS

- Record the entry for deferring gain on sale of building which was previously recognized in Profit and loss account due to conversion from U.S. GAAP to IFRS.

- Record the entry for reversing part of deferred gain already recognized in Profit and Loss account as per U.S. GAAP.