Hicks Co. leased a new computer for three years on January 1, 2019, with the following details:

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Hicks Co. leased a new computer for three years on January 1, 2019, with the following details: 

■ Payments: $1,200 per annum first due at the commencement date. 

■ Interest rate implicit in the lease: 5% and lessee is able to readily determine. 

■ Incremental borrowing rate: 7% per annum. 

■ Estimated useful life of equipment: 3 years. 

■ Other: Title does not transfer. The leased item is not dependent upon or highly interrelated with other assets.

 ■ Depreciation method: Straight-line. 

■ Year end: December 31.


Required: 

a. Assume that Hicks Co. elects to expense leases of low-value assets. Prepare the journal entries for 2019 and January 1, 2020. 

b. Assume that Hicks Co. does not elect to expense leases of low-value assets. Prepare the journal entries for 2019 and January 1, 2020.

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