On January1, 2020, Weber, Inc., entered into two lease contracts. The first lease contract was a six-year lease for computer equipment with $15,000 annual lease payments due at the end of each year. Weber took possession of the equipment on January 1, 2020. The second lease contract was a six-month lease, beginning January1, 2020, for warehouse storage space with $1,000 monthly lease payments due the first of each month. Weber made the first month’s payment on January1, 2020. The present value of the lease payments under the first contract is $74,520. The present value of the lease payments under the second contract is $5,853.
REQUIRED:
a. Assume that the first lease contract is a finance lease. Prepare the appropriate journal entry for this lease on January 1, 2020.
b. Assume the second lease contract is an operating lease. Prepare the proper journal entry for this lease on January 1, 2020.
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