On January 1,2011,Sheldon Company sold a building to Breezy Board Bank for $52,000,000 and immediately leased it back under a 15-year non-cancellable lease at $5,918,000 per year,payable at the beginning of each year.Breezy Board used an implicit rate of 9% to determine the lease payments,and this rate is known to Sheldon.The building had a carrying value of $34,000,000 on Sheldon's books.
Requirement:
Assume that the lease is an finance lease for both the lessee and lessor for both the lessee and lessor,and there is no profit margin for the lessor.Prepare all necessary journal entries for 2011 for Sheldon (the seller-lessee)and Breezy Board (the buyer-lessor).Breezy Board will depreciate the building on a straight-line basis over the remaining useful life of 15 years.Explain the implications to Soldier's depreciation expense of this transaction.

Question

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The Answer of On January 1,2011,Sheldon Company sold a building to Breezy Board Bank for $52,000,000 and immediately leased it back under a 15-year non-cancellable lease at $5,918,000 per year,payable at the beginning of each year.Breezy Board used an implicit rate of 9% to determine the lease payments,and this rate is known to Sheldon.The building had a carrying value of $34,000,000 on Sheldon's books.
Requirement:
Assume that the lease is an finance lease for both the lessee and lessor for both the lessee and lessor,and there is no profit margin for the lessor.Prepare all necessary journal entries for 2011 for Sheldon (the seller-lessee)and Breezy Board (the buyer-lessor).Breezy Board will depreciate the building on a straight-line basis over the remaining useful life of 15 years.Explain the implications to Soldier's depreciation expense of this transaction.

On January 1,2011,Sheldon Company Sold a Building to Breezy Board