Corbetts owns both the land and the building that it uses for windsurfing sail manufacturing and distribution. The original cost of its building was $300,000 and it currently has accumulated amortization of $240,000 as of January 1, 2018.

On this date, the building was sold to 2Rad Leasing company for $269,645 and then immediately leased back to Corbetts. The lease had a five year term and required payments on December 31 of each year. The rate implicit in the lease was 5%.

The 2Rad Leasing Company will pay the property taxes for the building of $8,400 per annum and these property tax costs are already included in the $55,000 annual lease payment from Corbetts (a separate executory costs).

Corbetts will also pay the additional maintenance and operating costs of $5,000 per year separately. The building is being amortized in accordance with the straight-line method over its remaining 7-year life, with $0 residual value.

Required:

1. i    Prepare the annual Lease Amortization Schedule from inception of this lease up to December 31, 2019 (round the initial lease obligation to the nearest dollar).

ii. Prepare entries to record the sale and leaseback of the building for Corbetts (lessee) at January 1, 2018

iii. Prepare year–end entries at December 31, 2018 for the lessee, Corbetts.

iv. Prepare entries to record the sale and the leaseback of the building for 2Rad (lessor) at January 1, 2018

v. Prepare year end entries for 2Rad (lessor) at December 31, 2018