A Company Leases an Asset for a 7-Year Period Under

question 90

Multiple Choice

A company leases an asset for a 7-year period under a capital lease and agrees to pay an annual rental of $15,000. The initial entry to record this transaction, assuming the present value of the lease payments is $84,000, would include

• A) Debit to Lease Expense for $15,000
• B) Debit to Lease Expense for $12,000
• C) Debit to Lease Asset for $84,000
• D) Credit to Lease Liability for $12,000

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Definitions:

Variable

A feature or characteristic that can vary among individuals or over time.

Characteristic

A feature or quality belonging typically to an individual, group, or situation, often used to define or distinguish.

Elements

Fundamental components or parts in a set or system.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed over a specific period of time.