On July 1,2015,Colby Company sold equipment to Cheddar Corporation and simultaneously leased it back for five years.The equipment's fair market value on July 1,2015 was $875,000 and its book value was $700,000.Colby and Cheddar agreed to an 8% interest rate with respect to the lease transaction.The equipment has a remaining life of five years and an estimated salvage value of zero after five years.Colby is required to make annual payments of $202,916 beginning July 1,2015.
Required:
Prepare the necessary journal entries for Colby Company to record the sale-leaseback for the year ended December 31,2015.Assume that the lease qualifies as a capital lease from Colby's perspective.

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The Answer of On July 1,2015,Colby Company sold equipment to Cheddar Corporation and simultaneously leased it back for five years.The equipment's fair market value on July 1,2015 was $875,000 and its book value was $700,000.Colby and Cheddar agreed to an 8% interest rate with respect to the lease transaction.The equipment has a remaining life of five years and an estimated salvage value of zero after five years.Colby is required to make annual payments of $202,916 beginning July 1,2015.
Required:
Prepare the necessary journal entries for Colby Company to record the sale-leaseback for the year ended December 31,2015.Assume that the lease qualifies as a capital lease from Colby's perspective.

On July 1,2015,Colby Company Sold Equipment to Cheddar Corporation and Simultaneously