Thomas Company owns 95 percent of the common stock of Bradley Financial Corporation, from which Thomas leases some of the assets it uses in its operations. On November 7, 20X8, Thomas entered into an operating lease with Bradley under which Thomas leases several delivery trucks for \(\$ 38.000\) per year; the lease payments are made at the end of each calendar year. Bradley recognizes \(\$ 21,000\) of depreciation per year on the trucks.

On January 2, 20X9, Thomas leased some heavy-duty lifting equipment from Bradley under a 10 -year direct financing lease. The terms of the lease call for Thomas to pay \(\$ 100,000\) on signing the lease and to make payments of \(\$ 59,612\) on December 31 of each year. The present value of the 10 end-of-year lease payments of \(\$ 59,612\) each is \(\$ 400,000\). The equipment has an estimated life of 10 years, with no residual value. An interest rate of 8 percent is implicit in the terms of the lease. The equipment had been purchased by Bradley on December 31, 20X8, for \(\$ 500,000\). Both companies use straight-line depreciation.
\section*{Required}

a. Present all entries recorded by Thomas during \(20 \mathrm{X} 9\) with respect to (1) the operating lease and (2) the direct financing lease.

b. Present all entries recorded by Bradley during \(20 \mathrm{X} 9\) with respect to (1) the operating lease and (2) the direct financing lease.

c. Present all eliminating entries regarding the intercompany leases that should appear in the workpaper to prepare a complete set of consolidated financial statements for \(20 \mathrm{X} 9\).