Question: Presented below are three different lease transactions in which Kristi Enterprises engaged in 2012. Assume that all lease transactions start on January 1, 2012. In

Presented below are three different lease transactions in which Kristi Enterprises engaged in 2012. Assume that all lease transactions start on January 1, 2012. In no case does Kristi receive title to the properties leased during or at the end of the lease term.

Instructions(a) Identify the leases above as operating or capital leases. Explain.(b) How should the lease transaction for Hofmeister Co. be recorded on January 1, 2012?(c) How should the lease transaction for Janca Inc. be recorded in2012?

Lessor Hofmeister Co. Truck None Denham Springs Co. Bulldozer None 4 years Janca Inc. Type of property Bargain purchase option Lease term Estimated economic life Yearly rental Fair value of leased asset Present value of the lease rental payments Furniture None 3 years 5 years 6 years 8 years 7 years $13,000 $80,000 $20,000 $20,500 $96,000 $48,000 $82,000 $ 9,000

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