To raise operating funds, Signal Aviation sold an airplane on January 1, 2013, to a finance company for $1,030,000. Signal immediately leased the plane back for a 10-year period, at which time ownership of the airplane will transfer to Signal. The airplane has a fair value of $1,060,000. Its cost and its book value were $750,000. Its useful life is estimated to be 12 years. The lease requires Signal to make payments of $147,243 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 9%.Prepare the appropriate entries for Signal on December 31, 2013, to record necessary adjustments.
Required: 1.Prepare the appropriate entries for Signal on January 1, 2013, to record the sale-leaseback.