To raise operating funds, North American Courier Corporation sold its building on January 1, 2021, to an insurance company for $503,000 and immediately leased the building back. The lease is for a 10-year period ending December 31, 2030, at which time ownership of the building will revert to North American Courier. The building has a carrying amount of $540,000 (original cost $1,280,000). The lease requires North American to make payments of $89,023 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 12%. (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:

1. Prepare the appropriate entries for North American (a) on January 1, 2021, to record the transaction and (b) on December 31, 2021, to record necessary adjustments.

Record the sale-leaseback.

Record cash payment.

Record depreciation expense.

2. Show how North American's December 31, 2021, balance sheet and income statement would reflect the sale-leaseback.