38.On January 1, 2010, Holly Company leased telephone equipment from ICON, Inc. Straight-line depreciation is used on all equipment with no salvage value. The contract required Holly to pay $5,000...

38.On January 1, 2010, Holly Company leased telephone equipment from ICON, Inc. Straight-line depreciation is used on all equipment with no salvage value. The contract required Holly to pay $5,000 each December 31 for the next three years, at which time the equipment is to be returned to ICON. Using an effective rate of interest of 8%, the present value of the lease payments is $12,885. Numerically derive the difference in Holly’s 2010 income if the lease is treated as an operating lease instead of a capital lease.

39.On January 1, 2010, Everton Company leased equipment under a 3-year lease with payments of $10,000 on January 1, 2010, 2011, and 2012. The present value of the lease payments at a discount rate of 9% is $27,591, which includes the immediate cash payment on January 1, 2010. If the lease is considered an operating lease, how much is rent expense for 2010?