On 1 July 2021, One Ltd Leased a Network Server

On 1 July 2021, One Ltd leased a network server from Short Ltd. The server had cost Short Ltd $32 000 on the same day. The lease agreement cost Short Ltd $1390 to set up and included the following: $\begin{array}{lr}\text {Lease term }&15 \text { years: }\\\text {Estimated economic life of the network server }&10 \text { years: }\\\text { The lease is cancellable}&\\\text { Annual rental payment (in arrears)}&\$6,500\\\text {Residual value at end of lease term }&\$24,000\\\text {Residual guarantee by One Ltd }&\$0\\\text {Interest rate implicit in the lease }&8\%\\\end{array}$
The journal entry recorded by the lessor to recognise the initial direct costs incurred would be:
a. $\begin{array}{lcc}\text { DR } & \text { Lease expense } \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad& \$ 1390 \\\text { CR } & \text { Cash } && \$ 1390\end{array}$

b. $\begin{array}{lcc}\text { DR } & \text { Deferred initial direct costs - equipment } & \$ 1390 \\\text { CR } & \text { Cash } && \$ 1390\end{array}$

c. $\begin{array}{lcc}\text { DR } &\text { Lease expense } & \$ 1390 \\\text { CR } &\text { Deferred initial direct costs - equipment }&& \$ 1390\end{array}$

d. $\begin{array}{lcc}\text { DR } &\text { Cash }& \$ 1390 \\\text { CR } &\text { Deferred initial direct costs - equipment }&& \$ 1390\end{array}$