To raise operating funds, Signal Aviation sold an airplane onJanuary 1, 2013, to a finance company for $1,150,000. Signalimmediately leased the plane back for a 13-year period, at whichtime ownership of the airplane will transfer to Signal. Theairplane has a fair value of $1,180,000. Its cost and its bookvalue were $810,000. Its useful life is estimated to be 15 years.The lease requires Signal to make payments of $153,490 to thefinance company each January 1. Signal depreciates assets on astraight-line basis. The lease has an implicit rate of 11%.



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