To raise operating funds, North American Courier Corporation sold its building on January 1, 2018, to an insurance company for $439,600 and immediately leased the building back. The lease is for a 10-year period ending December 31, 2024, at which time ownership of the building will revert to North American Courier. The building has a carrying amount of $410,000 (original cost $1,020,000). The lease requires North American to make payments of $74,637 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 11%.

Required: 1. Prepare the appropriate entries for North American on (a) January 1, 2018, to record the sale-leaseback (b) December 31, 2018, to record cash payment (c) December 31, 2018, to record depreicatione expense. 2. Show how North Americans December 31, 2018, balance sheet and income statement would reflect the sale-leaseback.