Gambet Labs Entered into a Lease Agreement on January 1,20X3,to $\begin{array} { l l l } \text { Rent Expenco } & 13,000 & \\\text { Cash } & & 13,000 \\\end{array}$

question 47

Multiple Choice

Gambet Labs entered into a lease agreement on January 1,20X3,to use an x-ray machine.The machine has a useful life of 6 years.Gambet Labs will make annual lease payments of $13,000 for 6 years,beginning on December 31,20X3.Assume a 14% interest rate.Using the present value tables,what is the journal entry to be made by Gambet Labs on December 31,20X3,to record the annual lease payment?

• A)\(\begin{array} { l l l }
• \text { Rent Expenco } & 13,000 & \\
• \text { Cash } & & 13,000 \\
• \end{array}\)
• B)\(\begin{array}{lccc}
• \text { Capital Lease Obligation } & 13,000 & \\
• \text { Eash } & & 13,000 \\
• \end{array}\)
• C)\(\begin{array}{lccc}
• \text { Capital Lease Obligation } & 2,080 & \\
• \text { Interest Expense } & 10,920 & \\
• \text { Cash } & & 13,000 \\
• \end{array}\)
• D)\(\begin{array}{lccc}
• \text { Capital Lease Obligation } & 5,923 & \\
• \text { Interest Expense } & 7,077 & \\
• \text { Cash } & & 13,000 \\
• \end{array}\)
• E)\(\begin{array}{lccc}
• \text { Capital Lease Obligation } & 11,180 & \\
• \text { Interest Expense } & 1,820 & \\
• \text { Cash } & & 13,000
• \end{array}\)

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Definitions:

Break-Even Point

The break-even point is the point at which total costs and total revenues are equal, meaning there is no net loss or gain.

Variable Costs

Costs that vary depending on the level of production or sales.

Fixed Costs

Expenses that remain constant regardless of production or sales volume, including rent, salaries, and insurance costs.

Total Cost

The complete amount of money required to purchase, produce, execute, or maintain something, including all related expenses and charges.