Reference no: EM132489879
Question - To raise operating funds, CED Inc. sold its office building to an insurance company on January 1, 2021, for $1,600,000 and immediately leased the building back. The operating lease is for the final 12 years of the building's estimated 20-year remaining useful life. The building has a fair value of $1,600,000 and a book value of $1,300,000 (its original cost was $2 million). The rental payments of $200,000 are payable to the insurance company each December 31. The lease has an implicit rate of 9%.
Required - Round your answers to the nearest whole dollar amounts.
1. Prepare the appropriate journal entries for CED Inc. on January 1, 2021, to record the sale-leaseback.
2. Prepare the appropriate journal entries for CED Inc. on December 31, 2021, to record necessary adjustments.
3. Show how CED's 12/31/2021 balance sheet would reflect the sale-leaseback.
4. Show how CED's 12/31/2021 income statement would reflect the sale-leaseback.
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