To raise operating funds National Distribution Center sold its
To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2011, for $800,000 and immediately leased the building back. The operating lease is for the final 12 years of the building's estimated 50-year useful life. The building has a fair value of $800,000 and a book value of $650,000 (its original cost was $1 million). The rental payments of $100,000 are payable to the insurance company each December 31. The lease has an implicit rate of 9%.

Prepare the appropriate entries for National Distribution Center on:
1. January 1, 2011, to record the sale-leaseback.
2. December 31, 2011, to record necessary adjustments.

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
Relevant Tutors available to help