A County Enters into a Lease for Maintenance Equipment

A county enters into a lease for maintenance equipment. The lease is for $1,000 a month for eight months, and the lease cannot be extended. The present value of the lease payments is $7,860. What journal entry should the county make in its General Fund when it signs the lease but before any payments are made?

A) Expenditures-capital outlay 8,000 Other financing source-short-term lease 8,000
B) Expenditures-capital outlay 7,860 Other financing source-short-term lease 7,860
C) Expenditures-capital outlay 7,860 Lease payable 7,860
D) No entry is needed until payments are actually made on the short-term lease