The following are three different lease transactions that occurred for McKay A/S in 2017. Assume that all lease contracts start on January 1, 2017. In no case does McKay receive title to the properties leased during or at the end of the lease term.

Instructions
(a) Which of the leases above are operating leases and which are finance leases? Explain.
(b) How should the lease transaction with Dunbar Co. be recorded in 2017?
(c) How should the lease transaction for Block Delivery be recorded on January 1, 2017?

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Lessor Block Delivei Dunbar Co. Jens Auto Type of property Yearly rental Lease term Estimated economic life Fair value of leased asset Present value of the lease rental Computer 8,000 6 years 7 years 42,000 Delivery equipm Automobile 4,200 4 years 7 years 19,000 3,700 2 years years 11,000 payments Bargain purchase option 38,000 None 13,000 None 6,400 None