Presented below are two independent situations.
1. Speedy Car Rental leased a car to Rundgren Company for 1 year. Terms of the operating lease agreement call for monthly payments of $500.
2. On January 1, 2011, Miles Inc. entered into an agreement to lease 20 computers from Halo Electronics. The terms of the lease agreement require three annual rental payments of $40,000 (including 10% interest) beginning December 31, 2011.The present value of the three rental payments is $99,474. Miles considers this a capital lease.
Instructions
(a) Prepare the appropriate journal entry to be made by Rundgren Company for the first lease payment.
(b) Prepare the journal entry to record the lease agreement on the books of Miles Inc. on January 1, 2011.