On January 1, William Company leased office equipment from Tell Corporation. The lease qualifies as an operating lease. The term is three years and calls for semiannual payments of $25,000 each, payable on June 30 and December 31 of each year. Tell acquired the machines at a cost of $150,000 on January 1 of the current year. The expected life is five years with no residual value expected.

Required:

1. Prepare all the appropriate journal entries for the lessee for the first year for: (a) leasee and (b) lessor

2. Show how the lessor would disclose this lease on the face of the balance sheet for December 31 of the current year.