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Delco Corporation entered into a five-year lease for a computer on January 1, Year 3. The lease requires Delco to make equal payments of $20,000
Delco Corporation entered into a five-year lease for a computer on January 1, Year 3. The lease requires Delco to make equal payments of $20,000 on January 1 each year for the five years of the lease, with the first payment made on January 1, Year 3. Delco's borrowing rate is 8 percent. Delco uses the straight-line depreciation method for financial reporting and estimates a zero salvage value for this computer at the end of the lease. The accounting period is the calendar year. Round amounts to the nearest dollar. Required: a. Give the journal entries that Delco would make during Year 3 if this lease were considered an operating lease. b. Repeat (a) but assume the lease is a capital lease. C. Compute the total expenses (ignore income taxes) that Delco would recognize over the 5- year term of the lease, assuming it is an operating lease. d. Repeat [c] but assume the lease is a capital lease
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