On January 1,2013,Jo Corporation leased some machinery for two years,paying $7,500 per year each December 31.The lease is considered to be an operating lease.How would the company record this transaction?
A)Debit Rental Expense for $7,500 and credit Cash for $7,500.
B)Debit Rental Expense for $15,000 and credit Cash for $15,000.
C)Debit Leased Assets for $7,500 and credit Lease Liability for $7,500.
D)Debit Leased Assets for $15,000 and credit Lease Liability for $15,000.
E)Debit Interest Expense $7,500 and credit Cash for $7,500.

Question

Quizplus · Accepted Answer

Since it is an operating lease, Jo Corporation would record the lease payment as a rental expense each year. Therefore, they would debit Rental Expense for $7,500 and credit Cash for $7,500 on December 31 each year.

On January 1,2013,Jo Corporation Leased Some Machinery for Two Years,paying