Three different lease transactions are presented below for Manitoba Enterprises. Assume that all lease transactions start on January $1,2024.$ Manitoba does not receive title to the properties, either during the lease term or at the end of it$.$ The yearly rental for each of the leases is paid at the beginning of each year. Manitoba Enterprises prepares its financial statements using ASPE.

ManufacturingEquipment

Vehicles

OfficeEquipment

Lease term

$5$ years

$6$ years

$3$ years

Estimated economic life

$15$ years

$7$ years

$6$ years

Yearly rental payment

$$14,000$

$$14,981$

$ $3,900$

Fair market value of leased asset

$$98,000$

$$85,000$

$$17,500$

Present value of lease rental payments

$$65,423$

$$81,674$

$$10,854$

Interest rate

$3\mathrm{.}5\%$

$4\%$

$8\%$

Instructions

Which of the above leases are operating leases and which are capital leases? Explain.

How should the lease transaction for each of the above assets be recorded on January $1,2024?$

Record the depreciation for each of the leases and accrue any interest on December $31,2024.$ The company uses straight$-$line depreciation.

Describe how the lease transaction would be reported on the $2024$ income statement and balance sheet for each of the above assets.