Presented below are three different lease transactions in which Amsrud Enterprises engaged in 2014. Assume that all lease transactions start on January 1, 2014. In no case does Amsrud receive title to the properties leased during or at the end of the lease term.

Instructions
(a) Identify the leases above as operating or capital leases. Explain.
(b) How should the lease transaction with Haber Co. be recorded on January 1, 2014?
(c) How should the lease transactions for Lennon Inc. be recorded in2014?

Transcribed Image Text:

Type of property Bargain purchase option Lease term Estimated cconomic life Yearly rental Fair value of leased asset Present value of the lease rental payments Lessor Schell Inc Haber Co. Lennon Inc Truck Nonc 6 ycars 7 years $15,000 $72,000 $62,000 Bulldozer Nonc 4 years 8 years $13,000 $80,000 Furniture Nonc 3 years 5 years $4,800 $27,500 $12,000 $48,000