On January 1, 2019, Dudas Inc. entered into a 12-month, non-renewable lease to rent office equipment. The lease payment is $1,500 per month first due on January 31, 2019. The interest rate implicit in the lease is 4.8% per annum (0.4% per month) and Dudas, which has an incremental borrowing rate of 4.0% per year, knows this. Dudas has a December 31 year end and depreciates similar equipment on a straight-line basis.

Required:

a. Assume that Dudas Inc. elects to expense leases of a short-term nature. Prepare the journal entries for the month of January 2019. 

b. Assume that Dudas Inc. does not elect to expense leases of a short-term nature. Prepare the journal entries for the month of January 2019.