(Answered) Question - to raise operating funds signal aviation sold an

Accounting

Question - To raise operating funds, Signal Aviation sold an airplane on January 1, 2011, to a finance company for $850,000. Signal immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $883,116. Its cost and its book value were $684,412. Its useful life is estimated to be 15 years. The lease requires Signal to make payments of $108,783 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 10%.

Required:

(1) Prepare the appropriate entries for Signal on January 1, 2011, to record the sale-leaseback.

(2) Prepare the appropriate entries for Signal on December 31, 2011, to record necessary adjustments.

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