Presented on the next page are three different lease transactions that occurred for Kear Inc. in 2010. Assume that all lease contracts start on January 1, 2010. In no case does Kear 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 capital leases? Explain.(b) How should the lease transaction for Flood Co. be recorded in 2010?(c) How should the lease transaction for Jansen Delivery be recorded on January 1,2010?

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Lessor Jansen Delivery Computer $6,000 6 years Flood Co. Delivery equipment $ 4,200 4 years Louis Auto Automobile $ 3,700 2 years Type of property Yearly rental Lease term Estimated economic life Fair market value of lease asset Present value of the lease rental payments Bargain purchase option 7 years $19,000 5 years $11,000 7 years $33,000 $31,000 None $13,000 None $ 6,400 None