Huss has signed a lease agreement with Jing Leasing Co. on January 1, 2019. The equipment being signed has an estimated life of five years, and the lease term is for 5 years. During the period of the lease, Huss will be responsible for all repairs and maintenance of the drilling equipment. The lease agreement calls for Huss to make five annual lease payments of $56,227.41 starting January 1, 2019. The interest rate is 9 percent.

Required:

A. Is this a capital lease or operating lease? Basis of your decision.
B. What is the entry when the lease is signed on January 1, 2019.
C. What is the entry for the lease on December 31, 2019?
D. How are the financial statements (Income Statement, Balance Sheet, and Statement of Cash Flows) impacted by the lease transactions in 2019?
E. If the leased asset had a life of 10 years and the lease terms called for five annual payments of $10,000 starting on January 1, 2019, how would you answer A–D above?