Burgess Limited accepts a lease incentive to enter into a 3-year operating lease for a building.The incentive is a cash amount of $5000 received on signing of the lease agreement.The lessee initially records this transaction as follows:
A)DR Lease expense $5000 CR Cash $5000
B)DR Incentive from lessor $5000 CR Cash $5000
C)DR Incentive to lessee $5000 CR Rent income $5000
D)DR Cash $5000 CR Lease incentive from lessor $5000.

Question

Quizplus · Accepted Answer

The correct entry is to debit Cash to reflect the receipt of the incentive and credit Lease incentive from lessor to recognize the liability or deferred income related to the incentive.

Burgess Limited Accepts a Lease Incentive to Enter into a 3-Year