To Raise Operating Funds, Azure Sailing Sold a Boat on January

To raise operating funds, Azure Sailing sold a boat on January 1, 2018, to a finance company for $2,310,000. Azure immediately leased the plane back for a 13-year period, at which time ownership of the airplane will transfer to Azure. The boat has a fair value of $2,400,000. Its cost and its book value were $1,800,000. Its useful life is estimated to be 15 years. The lease requires Azure to make payments of $308,313 to the finance company each January 1. Signal depreciates assets on a straight-line basis. The lease has an implicit rate of 11%.
Required:
Round your answers to the nearest whole dollar amounts.
Prepare the appropriate journal entries for Azure on:
1. January 1, 2018, to record the transaction.
2. December 31, 2018, to record necessary adjustments.

Correct Answer:

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1. Transfer of ownership indicates that ...

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