For each of the items below, indicate whether the lease is an operating lease or a capital lease. Reminder: The lessor is the party who owns the item; the lessee is the party using the item. Item 1 The lessee reports the leased asset on its balance sheet.
| For each of the items below, indicate whether the lease is an operating lease or a capital lease. | |||
| Reminder: The lessor is the party who owns the item; the lessee is the party using the item. | |||
| Item 1 | The lessee reports the leased asset on its balance sheet. | ||
| Item 2 | Payments are reported fully as rent expense. | ||
| Item 3 | Ownership of the property passes to the lessee by the end of the lease term. | ||
| Item 4 | The lease term is at least 75% of the remaining life of the property. | ||
| Item 5 | Interest expense is measured and reported by the lessee. | ||
| Item 6 | Depreciation of the leased asset is not reported by the lessee. | ||
| Item 7 | At the inception of the lease, the lessee records both an asset and a liability. | ||
| Item 8 | The lessee reports a liability for the present value of all future payments anticipated under the lease agreement. | ||
| Item 9 | The lessor continues to report the tangible asset covered by the lease on its balance sheet. | ||
| Listed below are nine fixed-asset transactions. Record the journal entries. Dates and descriptions are not required. The only account titles you will need are listed: | |||||||||
| Account titles: | |||||||||
| Cash | |||||||||
| Land | |||||||||
| Land Improvements | |||||||||
| Building | |||||||||
| Equipment | |||||||||
| Expense (Determine what expense account titles.) | |||||||||
| Item 1 | Paid $2,500 for insurance coverage on equipment. | ||||||||
| Item 2 | Paid $7,500 for trees and shrubs. | ||||||||
| Item 3 | Paid $500 attorney’s fees for document preparation related to land purchase. | ||||||||
| Item 4 | Paid $150,000 for land and building. The land was separately valued at $40,000, and the building at $120,000. Hint: The cash is only $150,000, and the entry must balance. | ||||||||
| Item 5 | Paid $1,000 freight costs on purchase of new furniture. | ||||||||
| Item 6 | Paid $300 for staplers, trash cans, and desktop mats. | ||||||||
| Item 7 | Ordered new $50,000 truck, to be delivered and paid for in the future. | ||||||||
| Item 8 | Paid $10,000 of interest costs on loan on active building construction project. | ||||||||
| Item 9 | Paid $25,000 to expand parking lot paving. | ||||||||
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