On January 1, 2019, Amelia Company (seller-lessee) sold a plane to Lewis Financial (buyer lessor) for its fair value of $14,000,000 and immediately leased it back under a 10-year lease at $1,676,199 per year, payable at the beginning of each year. The lease payment reflects market rents. Amelia must repurchase the plane from Lewis at the end of the lease term for $4,000,000. The plane is expected to have a residual value of $0 at the end of its remaining useful life of 20 years. The interest rate implicit in the lease is 8% and Amelia is able to readily determine this. At the time of sale, the carrying cost of the plane was $20,000,000 less accumulated depreciation of $12,000,000. Both companies have a December 31 year end and both companies depreciate this type of asset on a straight-line basis.

Required:

a. Evaluate how the seller-lessee (Amelia) should account for the lease transaction. 

b. Prepare the journal entries on January 1, 2019, December 31, 2019, and January 1, 2020, for Amelia, the seller-lessee, pertaining to this sale and leaseback transaction.