On January 1 of the Current Year, Stephens Corporation Leased $\begin{array}{lrr} \text {Rent Expense } &34,000\\ \text { Cash} &&34,000\\\end{array}$

On January 1 of the current year, Stephens Corporation leased machinery from Montgomery Company. The machine originally cost Montgomery $277,000. The lease agreement is an operating lease, the terms of which call for five annual payments of $34,000. The first payment is due at the inception of the lease; the other four payments are due on January 1 of subsequent years. What journal entry should Stephens make on January 1 of the current year?

A) $\begin{array}{lrr} \text {Rent Expense } &34,000\\ \text { Cash} &&34,000\\\end{array}$

B) $\begin{array}{lrr} \text {Prepaid Rent } &34,000\\ \text { Cash} &&34,000\\\end{array}$
C) $\begin{array}{lrr} \text {Rent Expense } &55,400\\ \text { Cash} &&55,400\\\end{array}$

D) $\begin{array}{lrr} \text {Prepaid Rent } &55,400\\ \text { Cash} &&55,400\\\end{array}$