Leases On January 1, Cooper, Inc., entered into two lease contracts. The first lease contract was a seven-year lease for a sound system with $31,250 annual lease payments due at the end of each year. Spider took possession of the sound system on January 1. The fair value of the system is $192,500 The second lease contract was a nine-month lease, beginning January 1 for warehouse storage space with $2,250 monthly lease payments due the first of each month. Cooper made the first month's payment on January 1 The present value of the lease payments under the first contract is $175,000. The present value of the lease payments under the second contract is $19,500. a. Determine the financial statement effect of the first lease on January 1. b. Determine the financial statement effect of the second lease on January 1. c. Why are these leases treated differently on the balance sheet? Transaction a. Sound system lease b. Storage space lease Income Statement Expenses Net Income Assets Balance Sheet Liabilities + Revenues Equity By Save Answers Leases On January 1, Cooper, Inc., entered into two lease contracts. The first lease contract was a seven-year lease for a sound system with $31,250 annual lease payments due at the end of each year. Spider took possession of the sound system on January 1. The fair value of the system is $192,500 The second lease contract was a nine-month lease, beginning January 1 for warehouse storage space with $2,250 monthly lease payments due the first of each month. Cooper made the first month's payment on January 1. The present value of the lease payments under the first contract is $175,000. The present value of the lease payments under the second contract is $19,500. a. Determine the financial statement effect of the first lease on January 1. b. Determine the financial statement effect of the second lease on January 1. c. Why are these leases treated differently on the balance sheet? Transaction a. Sound system lease b. Storage space lease Assets Balance Sheet Liabilities + Equity Only the sound system lease qualifies as a finance lease. Rev Only the stoage space lease qualifies as a finance lease. The storage space lease payment is under $10,000 per month