To raise operating funds, North American Courier Corporation sold its building on January 1, 2018, to an insurance company for $520,900 and immediately leased the building back. The lease is for a 10-year period ending December 31, 2027, at which time ownership of the building will revert to North American Courier. The building has a carrying amount of $510,000 (original cost $1,220,000). The lease requires North American to make payments of $84,773 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%.

1. Prepare the following Journal Entries:

Jan 1, 2018: Record the sale leaseback

Dec 31, 2018: Record cash payment

Dec 31, 2018: Record depreciation expense

2.

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Show how North American's December 31, 2018, balance sheet and income statement would reflect the sale-leaseback (Round your intermediate and final answers to nearest whole dollar.) Balance Sheet Assets: Building Less: Accumulated depreciation Liabilities: Current Lease expense Noncurrent: Lease payable Income Statement Interest expense Depreciation expense