To raise operating funds, North American Courier Corporation sold its building on January 1, 2016, to an insurance company for $560,000 and immediately leased the building back. The lease is for a 10-year period ending December 31, 2025, at which time ownership of the building will revert to North American Courier. The building has a book value of $400,000 (original cost $1,000,000). The lease requires North American to make payments of $91,137 to the insurance company each December 31. The building had a total original useful life of 30 years with no residual value and is being depreciated on a straight-line basis. The lease has an implicit rate of 10%. (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 the appropriate entries for North American on (a) January 1, 2016, to record the sale-leaseback and (b) December 31, 2016, to record necessary adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Jan. 1, 2016 Record the sale-leaseback. Jan. 1, 2016 Record lease. Dec. 31, 2016 Record cash payment. Dec. 31, 2016 Record depreciation expense. Dec. 31, 2016 Record adjustment for the gain. Show how North Americans December 31, 2016, balance sheet and income statement would reflect the sale-leaseback.