A comparison between Operating Lease and Capital Lease Company ABC leases an equipment for 3 years. Other information available: *Leased assets have an expected life of 5 years. *Depreciation is straight line. *Annual lease payment is $2,505. *Interest rate is 8%. *the ownership of the property goes back to the lessor at the end of the lease term *Lease payments are made at end of each year. *the present value of the lease payment is $6456. (Present value of 2,505 ordinary annuity for 3 years at 8%) *Fair value of the equipment is 10,000. *The lease does not contain a bargain purchase option a. Determining type of lease. Please read the lease terms above carefully. (i) lease transfers ownership of property to lessee by end of the lease term (ii) lease contains an option to purchase the property at a bargain price (iii) lease term is 75% or more of estimated economic life of the property (iv) present value of rentals and other minimum lease payments at beginning of lease term is 90% or more of the fair value of leased property Which of the above criteria is met? (i) YES <-Choose from the drop-down menu (ii) NO <-Choose from the drop-down menu (iii) <-Choose from the drop-down menu (iv) <-Choose from the drop-down menu Based on your answers above, what type of lease is this? <-Choose from the drop-down menu b. To record the type of lease indicated above, the following JE should be recorded when each lease payment is made Dr: <-Choose account enter amount Cr: <-Choose account enter amount