Gail Inc. leased new office furniture for two years on January 1, 2019, with the following details: 

■ Payments: $2,000 per annum first due at the commencement date. 

■ Interest rate implicit in the lease: 5%; however, lessee is not able to readily determine this. 

■ Incremental borrowing rate: 4% per annum. 

■ Estimated useful life of equipment: 5 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 Gail Inc. elects to expense leases of low-value assets. Prepare the journal entries for 2019 and January 1, 2020. 

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