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Carla Vista Corporation owned a manufacturing facility. Carla Vista had purchased the building for $10,080,000, and had recorded $3,000,000 depreciation on the facility. On January 1, 2023, Carla Vista sold the building to Sandhill Ltd. for $7,980,000, and then Immediately signed a 25-year agreement to lease back the building for annual payments of $799,219, due at the start of each year. Title to the building would return to Carla Vista at the conclusion of the lease. Sandhill's implied interest rate, which was known to Carla Vista, was 10%. Prepare the journal entries to be recorded by Carla Vista for the 2023 fiscal year and January 1, 2024 payment (assuming a December 31 year-end, and that Carla Vista follows ASPE). (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not Indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Jan. 1, 2023 V Cash Jan. 1, 2023 Jan. 1,2023 Dec. 31,2023 Dec. 31, 2023 Dec. 31, 2023 Jan. 1, 2024 Accumulated Depreciation-Buildings Buildings Deferred Profit on Sale-Leaseback (To record sale of building) Right-of-Use Asset Lease Liability (To record inception of lease) Lease Liability Cash (To record lease payment) Depreciation Expense Accumulated Depreciation-Leased Buildings (To record depreciation expense) (To record amortization of deferred gross profit) Interest Expense Cash (To record interest) Lease Liability Cash (To record lease payment) Debit 7980000 3000000 7080000 799219 283200 628078 799219 Credit 10080 900 7980 799 2821 718 799

Carla Vista Corporation owned a manufacturing facility. Carla Vista had purchased the building for $10,080,000, and had recorded $3,000,000 depreciation on the facility. On January 1, 2023, Carla Vista sold the building to Sandhill Ltd. for $7,980,000, and then Immediately signed a 25-year agreement to lease back the building for annual payments of $799,219, due at the start of each year. Title to the building would return to Carla Vista at the conclusion of the lease. Sandhill's implied interest rate, which was known to Carla Vista, was 10%. Prepare the journal entries to be recorded by Carla Vista for the 2023 fiscal year and January 1, 2024 payment (assuming a December 31 year-end, and that Carla Vista follows ASPE). (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not Indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Jan. 1, 2023 V Cash Jan. 1, 2023 Jan. 1,2023 Dec. 31,2023 Dec. 31, 2023 Dec. 31, 2023 Jan. 1, 2024 Accumulated Depreciation-Buildings Buildings Deferred Profit on Sale-Leaseback (To record sale of building) Right-of-Use Asset Lease Liability (To record inception of lease) Lease Liability Cash (To record lease payment) Depreciation Expense Accumulated Depreciation-Leased Buildings (To record depreciation expense) (To record amortization of deferred gross profit) Interest Expense Cash (To record interest) Lease Liability Cash (To record lease payment) Debit 7980000 3000000 7080000 799219 283200 628078 799219 Credit 10080 900 7980 799 2821 718 799

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Carla Vista Corporation owned a manufacturing facility. Carla Vista had purchased the building for $10,080,000, and had recorded $3,000,000 depreciation on the facility. On January 1, 2023, Carla Vista sold the building to Sandhill Ltd. for $7,980,000, and then Immediately signed a 25-year agreement to lease back the building for annual payments of $799,219, due at the start of each year. Title to the building would return to Carla Vista at the conclusion of the lease. Sandhill's implied interest rate, which was known to Carla Vista, was 10%. Prepare the journal entries to be recorded by Carla Vista for the 2023 fiscal year and January 1, 2024 payment (assuming a December 31 year-end, and that Carla Vista follows ASPE). (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not Indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Jan. 1, 2023 V Cash Jan. 1, 2023 Jan. 1,2023 Dec. 31,2023 Dec. 31, 2023 Dec. 31, 2023 Jan. 1, 2024 Accumulated Depreciation-Buildings Buildings Deferred Profit on Sale-Leaseback (To record sale of building) Right-of-Use Asset Lease Liability (To record inception of lease) Lease Liability Cash (To record lease payment) Depreciation Expense Accumulated Depreciation-Leased Buildings (To record depreciation expense) (To record amortization of deferred gross profit) Interest Expense Cash (To record interest) Lease Liability Cash (To record lease payment) Debit 7980000 3000000 7080000 799219 283200 628078 799219 Credit 10080 900 7980 799 2821 718 799
Transcribed Image Text:Carla Vista Corporation owned a manufacturing facility. Carla Vista had purchased the building for $10,080,000, and had recorded $3,000,000 depreciation on the facility. On January 1, 2023, Carla Vista sold the building to Sandhill Ltd. for $7,980,000, and then Immediately signed a 25-year agreement to lease back the building for annual payments of $799,219, due at the start of each year. Title to the building would return to Carla Vista at the conclusion of the lease. Sandhill's implied interest rate, which was known to Carla Vista, was 10%. Prepare the journal entries to be recorded by Carla Vista for the 2023 fiscal year and January 1, 2024 payment (assuming a December 31 year-end, and that Carla Vista follows ASPE). (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not Indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Jan. 1, 2023 V Cash Jan. 1, 2023 Jan. 1,2023 Dec. 31,2023 Dec. 31, 2023 Dec. 31, 2023 Jan. 1, 2024 Accumulated Depreciation-Buildings Buildings Deferred Profit on Sale-Leaseback (To record sale of building) Right-of-Use Asset Lease Liability (To record inception of lease) Lease Liability Cash (To record lease payment) Depreciation Expense Accumulated Depreciation-Leased Buildings (To record depreciation expense) (To record amortization of deferred gross profit) Interest Expense Cash (To record interest) Lease Liability Cash (To record lease payment) Debit 7980000 3000000 7080000 799219 283200 628078 799219 Credit 10080 900 7980 799 2821 718 799
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