The journal entry to record payments made on an operating lease would include a:
A)debit to Rent Expense
B)credit to the asset leased
C)debit to Interest Expense
D)credit to Lease Payment Obligation

Question

Quizplus · Accepted Answer

Operating lease payments are treated as an expense, and therefore should be recorded as a debit to Rent Expense. This transaction does not involve any changes to the Lease Payment Obligation (which is an upfront liability when entering into the lease agreement), nor does it affect the underlying asset leased. Interest Expense is only applicable to finance leases, where the lease payments are also used to repay the principal amount borrowed to acquire the asset.

The Journal Entry to Record Payments Made on an Operating