On January 1, 2014, Von Company entered into two noncancelable leases for new machines to be used in its manufacturing operations.

The first lease does not contain a bargain purchase option; the lease term is equal to 80 precent of the estimated economic life of the machine.

The second lease contains a bargain purchase option; the lease term is equal to 50 precent of the economic life of the machine.

Required:

a. How should a lessee record each minimum lease payment for a capital lease?

b. How should Von classify each of two leases? why?