The Journal Entry for Recording Payment for the Short-Term Lease

question 26

Multiple Choice

The journal entry for recording payment for the short-term lease of a fixed asset would

• A) be a memo entry only
• B) debit the fixed asset and credit Cash
• C) debit Rent Expense and credit Cash
• D) debit a liability and credit Cash

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Definitions:

Assets And Liabilities

Represent the resources a company owns or controls (assets) and the obligations it owes to outsiders (liabilities).

Operating Lease

A lease agreement for the use of an asset where the lessor remains the owner, and the lessee does not record the asset on its balance sheet.

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life to account for declines in value over time.

Residual Value Guarantee

A commitment to ensure that an asset will have a specified value at the end of its lease term.