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question leases on january 1 spider inc entered into two lease contracts the first l 4293974

Question

Leases

On January 1, Spider, Inc., entered into two lease contracts. The first lease contract was a 6-year lease for a computer with $16,500 annual lease payments due at the end of each year. Spider took possession of the computer on January 1. The second lease contract was a six month lease, beginning January 1 for warehouse storage space with $1,100 monthly lease payments due the first of each month. Spider made the first month's payment on January 1. The present value of the lease payments under the first contract is $81,972. The present value of the lease payments under the second contract is $6,438.

a. The first lease contract is a capital lease. Prepare the journal entry for this lease on January 1.

b. The second lease contract is an operating lease. Prepare the journal entry for this lease on January 1.

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