To raise operating funds, Signal Aviation sold an airplane on January 1, 2013, to a finance company for $1,130,000. Signal immediately leased the plane back for a 12-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $1,160,000. Its cost and its book value were $800,000. Its useful life is estimated to be 14 years. The lease requires Signal to make payments of $162,878 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 12%.

Required:
1.	Prepare the appropriate entries for Signal on January 1, 2013, to record the sale-leaseback. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

1. Record the sale of the airplane.

2. Record the lease.

3. Record the cash payment.

2.	Prepare the appropriate entries for Signal on December 31, 2013, to record necessary adjustments. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

1. Record the interest expense.

2. Record the depreciation expense.

3. Record any necessary adjustments to depreciation.

Journal Accounts:

No journal entry required

Accretion revenue

Accumulated depreciation

Airplanes

Amortization expense

Building

Cash

Cost of goods sold

Deferred gain on sale-leaseback

Deferred initial direct cost

Deferred profit

Deferred rent expense payable

Depreciation expense

Gain on sale-leaseback

Insurance premium payable

Interest expense

Interest payable

Interest receivable

Interest revenue

Inventory of equipment

Lease expense

Lease payable

Lease receivable

Lease revenue

Leased airplane

Leased building

Leased equipment

Leased land

Leasehold improvements

Loss on leased assets

Loss on residual value guarantee

Maintenance expense

Maintenance fee payable

Notes payable

Prepaid maintenance expense

Prepaid rent

Profit

Rent expense

Rent revenue

Residual asset

Right-of-use equipment

Sales revenue

Selling expense

Unearned miscellaneous revenue

Unearned rent revenue