Presented below are two independent situations.

1. Speedy Car Rental leased a car to Mayfield Company for one year. Terms of the operating lease agreement call for monthly payments of $500.

2. On January 1, 2010, Olsen Inc. entered into an agreement to lease 20 computers from Gage Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2010.The present value of the three rental payments is $74,606. Olsen considers this a capital lease.

Instructions

(a) Prepare the appropriate journal entry to be made by Mayfield Company for the first lease payment.

(b) Prepare the journal entry to record the lease agreement on the books of Olsen Inc. on

January 1, 2010.