Question

Central Purchasing Ltd. (CPL) owns the building it uses; it had an original cost of $815,000 and a net book value of $250,000 as of 1 January 20X2. On this date, the building was sold to a real estate investment trust (REIT) for $537,500, which also was the building’s fair value, and simultaneously leased back to CPL.

The lease has a guaranteed, 12-year term and required payments on 31 December of each year. The payments are $74,500, and the lease allows the property to revert to the lessee at the end of the lease. CPL could have mortgaged this property under similar terms at an interest rate of 10%. The REIT will pay property taxes estimated to be $16,000 per year. These costs are included in the lease payment. CPL will pay maintenance and operating costs. The building is being depreciated straight-line, with an estimated remaining life of 16 years.

(PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)

Required:
1. Prepare entries to record the sale and leaseback of the building. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Journal Entry Worksheet

Entry 1. Record the sale and leaseback of the building

Entry 2. Record the building under finance lease

2. Prepare year-end adjusting entries for 2012

1. recrod the interest expense

2.Record the Property tax expense and the lease payment.

3. Record the depreciation expense for leased building.

4. Record the depreciation expense on sale and leaseback of building.

3.a) Show how all amounts related to the sale and leaseback will be presented on the statement of financial position in 2012.

	Statement of Financial Position (Partial) Capital assets: $0 Deferred credits: Short-term liabilities: Long-term liabilities: 0

3.b) Show how all amounts related to the sale and leaseback will be presented on the statement of comprehensive income in 2012.

	Statement of comprehensive income (Partial)

Central Purchasing Ltd. (CPL) owns the building it usos; it had an original cost of $815.000 and a net book value of $250,000 as of 1 January 20X2 On this date, the building was sold to a real estate investment trust (REIT) for $537,500, which also was the bulding's fair value, and simultaneously leased back to CPL The lease has a guarantoed, 12-year torm and required payments on 31 December of each year The payments are $74,500, and the lease allows the property to revort to the lessoe alt the and of the loase CPL could have mortgaged this property under similar terms at an interest rate o 10% The R IT wil pay property ta es estimated to be S16 por year. These costs a eroded in the lease pay mont. CPL will pay maintonance and operating costs. Tho building is being depreciated straight-line, with an estimated remaning life of 16 years PV of $1. PVA of $1. and PVAD of $1.) (Use appropriate factorís) from the tables provided.) Required: 1 P pare e tries' tore ord the sale and Ina eba k of the buld g no entry is required for a transaction event, select No ournal entry required in the first account neld. Do not round intermediate calculations.) View transaction list Journal entry worksheet Record the sale and leaseback of the building Note: Enter delits belore creds General Journal Debit

Answer 1

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I am answering the part 1 and some sub - parts of part 2.