On January 1, Duncan Corporation leased a delivery van, agreeing to pay $10,575 every December 31 for the six-year life of the lease. The present value of the lease payments, at 6% interest, is $52,000. The lease is considered a capital lease. The general journal entry to record the acquisition of the delivery van is:
A)Debit Lease Expense $52,000; credit Lease Payable $52,000.
B)Debit Leased Asset-Delivery Van $52,000; credit Cash $52,000.
C)Debit Rent Expense $10,575; credit Lease Liability $10,575.
D)Debit Leased Asset-Delivery Van $52,000; credit Lease Liability $52,000.
E)No entry required until the first payment is made.

Question

Quizplus · Accepted Answer

The journal entry to record the acquisition of the delivery van under a capital lease includes debiting the leased asset account and crediting the lease liability account for the present value of the lease payments, which is $52,000 in this case. Therefore, only option D is correct, which debits Leased Asset-Delivery Van for $52,000 and credits Lease Liability for $52,000. The other options are incorrect because they do not follow the correct accounting treatment for a capital lease.

On January 1, Duncan Corporation Leased a Delivery Van, Agreeing