On January 1, the Forman Group Leased Some Equipment on a 5-Year

question 67

Multiple Choice

On January 1, the Forman Group leased some equipment on a 5-year lease, paying $15,000 per year each December 31. The lease is considered to be an operating lease. The general journal entry to record the first lease payment on December 31 should be:

• A)Debit Rent Expense $15,000; credit Cash $15,000.
• B)Debit Rent Expense $75,000; credit Rent Payable $75,000.
• C)Debit Rent Expense $15,000; credit Prepaid Rent $15,000.
• D)Debit Cash $15,000; credit Prepaid Rent $15,000.
• E)Debit Lease Liability $15,000; credit Cash $15,000.

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Definitions:

Insurance Policy

A legal agreement between an insurer and the insured, providing financial protection against loss or damage in return for payment of a premium.

Total Loss

A situation in which property is so severely damaged that repairing it is not reasonable or possible, often leading to a claim of the full insured value.

Fire Damage

Destruction or injury caused by fire.

Shareholder

An individual or entity that owns part of a public or private corporation through possession of one or more shares of its stock.