Flounder Company, a risky start-up, is evaluating a lease arrangement being offered by TSP Company for use of a standard computer system. The lease is non-cancelable, and in no case does Flounder receive title to the computers during or at the end of the lease term. The lease starts on January 1, 2020, with the first rental payment due on January 1, 2020. Additional information related to the lease and the underlying leased asset is as follows.

Yearly rental		$2,996.15
Lease term		3 years
Estimated economic life		5 years
Purchase option		$2,940 at end of 3 years, which approximates fair value
Renewal option		1 year at $1,470; no penalty for nonrenewal; standard renewal clause
Fair value at commencement		$9,800
Cost of asset to lessor		$9,800
Residual value:
Guaranteed		0
Unguaranteed		$2,940
Lessors implicit rate (known by the lessee)		10%
Estimated fair value at end of lease		$2,940

Q1.Analyze the lease capitalization tests for this lease for Flounder. Prepare the journal entries for Flounder for 2020.(Require 3 journal entry here, need to include date)

Q2. Analyze the lease capitalization tests for this lease for Flounder. Assuming Flounder has the option to purchase the system at the end of the lease for $100. Prepare the journal entries for Flounder for 2020. (Require 4 journal entry here, need to include date)