On January 1,2015,Ferguson Company signed a lease agreement that requires monthly payments of $1,000 at the beginning of every month for two years.Ferguson Company paid $1,000 on January 1,2015.This is a capital lease.The present value of the lease payments is $19,000.What journal entry is required by Ferguson Company on January 1,2015?
A)debit Leased Asset $1,000 and credit Lease Obligation $1,000
B)debit Rent Expense $1,000 and credit Cash $1,000
C)debit Leased Asset $19,000,credit Cash $1,000 and credit Lease Obligation $18,000
D)debit Leased Asset $18,000 and credit Lease Obligation $18,000

Question

Quizplus · Accepted Answer

The entry records the leased asset at its present value of $19,000, reduces cash by the initial payment of $1,000, and recognizes the remaining lease obligation of $18,000.

On January 1,2015,Ferguson Company Signed a Lease Agreement That Requires