Presented below are three different lease transactions in which Ortiz Enterprises engaged in 2011.Assume that all lease transactions start on January 1, 2011. In no case does Ortiz 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 with Casey Co. be recorded on January 1, 2011?
(c) How should the lease transactions for Lester Inc. be recorded in2011?

Lesso Schoen In Casey Co. Lester Inc. Type of property Bargain purchase option Lease term Estimated economic life Yearly rental Fair market value of leased Bulldozer None years 8 years $13,000 Truck None 6 years years $15,000 Furniture None years 5 years $4,000 $80,000 $72,000 $27.500 asset Present value of the lease rental payments $48,000 $62,000 $12,000