Presented below are two independent situations.
1. Josh Car Rental leased a car to Bayfield Company for one year. Terms of the operation lease agreement call for monthly payments of $500.
2. On January 1, 2008, James Inc. entered into an agreement to lease 20 computers from Marcus Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2008. The present value of the three rental payments is $74,606. Josh considers this a capital lease.
Instructions:
a) Prepare the appropriate journal entry to be made by Bayfield Company for the first lease payment
b) Prepare the journal entry to record the lease agreement on the books of Josh inc. on January 1, 2008
Please be as accurate as possible, and the answer should be within in the operating and capital lease topic.