A City Leases Equipment on January 1, 2019 by Means $\begin{array}{lrr}\text { Expenditures-lease principal } & 100,000 \\\quad \text { Cash } && 100,000 \\\end{array}$

A city leases equipment on January 1, 2019 by means of a long-term lease agreement. The agreement calls for paying the leasing company $300,000 in three $100,000 annual payments, starting December 31, 2019. The present value of the three lease payments, using a 6% annual interest rate, is $267,301. The city will make the lease payments from the General Fund. What journal entry should the city make in the General Fund when it makes its first annual payment on the lease on December 31, 2019?
a.
$\begin{array}{lrr}\text { Expenditures-lease principal } & 100,000 \\\quad \text { Cash } && 100,000 \\\end{array}$

b.
$\begin{array}{lrr}\text { Expenditures-lease principal } & 82,000 \\\text { Expenditures-lease interest } & 18,000 \\\quad \text { Cash } &&100,000 \\\end{array}$

c.
$\begin{array}{lrr}\text { Lease payable } & 100,000 \\\quad \text { Cash } && 100,000 \\\end{array}$

d.
$\begin{array}{lrr}\text { Lease payable } & 82,000 \\\text { Expenditures-lease interest } & 18,000 \\\quad \text { Cash } &&100,000\end{array}$