To raise operating funds, Signal Aviation sold an airplane on January 1, 2024, to a finance company for $770,000. 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 $800,000.
∙ Its cost and its book value were $600,000.
∙ Its useful life is estimated to be 15 years.
∙ The lease requires Signal to make payments of $102,771 to the finance company each January 1. Signal depreciates assets on a straight-line basis.
∙ The lease has an implicit rate of 11%.

Required:
Prepare the appropriate entries for Signal on
1. January 1, 2024, to record the transaction
2. December 31, 2024, to record necessary adjustments