The Southwest News Company leased two new printing presses. Each of the presses has an estimated service life of seven years. Press 1 was leased for five years. Press 2 was leased for six years. Each lease agreement calls for \(\$ 40,000\) annual lease payments at the end of the year ( \(\$ 80,000\) for both presses). When the period of each lease expires, each press will be returned to the lessor. Both leases were signed on December 31, 1989, at which time the prevailing interest rate available to Southwest News for equipment loans was \(9 \%\). Each of the presses could have been purchased for \(\$ 180,000\) cash.

\section*{Required}
(Round all amounts in your answers to the nearest whole dollar.)
1. Prepare any required entries to record the lease of

(a) Press 1 and

(b) Press 2 .
2. Prepare the required entries as of the end of the first year in

(a) the life of Press 1 and

(b) the life of Press 2. Use straight-line depreciation. (Hint: If the length of a capital lease is less than the asset's estimated service life and the asset remains the property of the lessor, depreciation must be taken over the length of the lease.)
3. Press 1 was returned to the lessor on December 31, 1994, the end of the fifth year. Prepare the required entries as of the end of the fifth year in

(a) the life of Press 1 and

(b) the life of Press 2.
4. Show how Press 2 and the lease liability for the press should appear on the balance sheet as of the end of the fifth year in the life of the lease (after the year-end lease payment).