To raise operating funds, Signal Aviation sold an airplane on January 1, 2013, to a finance company for $1,150,000. 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 $1,180,000. Its cost and its book value were $810,000. Its useful life is estimated to be 15 years. The lease requires Signal to make payments of $153,490 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 11%.
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.)
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.)