On January 1, 2013, Daisy Corporation leased equipment, agreeing to pay $5,000 every December 31 for the entire four years of the lease. The present value of the lease payments, at 6% interest is $17,326. The lease is considered a capital lease. How would the company record this transaction? Solution The correct answer is: Debit Leased Assets for $20,000 and credit Lease Liability for $20,000 A lease considered to have the economic characteristics of asset ownership. A capital lease would be considered a purchased asset for accounting purpose. .

1. On January 1, 2013, Daisy Corporation leased equipment, agreeing to pay $5,000 every
December 31 for the entire four years of the lease. The present value of the lease payments, at
6% interest is $17,326. The lease is considered a capital lease. How would the company record
this transaction?
Debit Rental Expense for $17,326 and credit Cash for $17,326.
Debit Rental Expense for $5,000 and credit Cash for $5,000.
Debit Leased Assets for $17,326 and credit Lease Liability for $17,326.
Debit Leased Assets for $20,000 and credit Lease Liability for $20,000.
Debit Interest Expense $4,717, debit Lease Liability for $283, and credit Cash for $5,000
Solution
The correct answer is:
Debit Leased Assets for $20,000 and credit Lease Liability for $20,000
A lease considered to have the economic characteristics of asset ownership. A capital lease
would be considered a purchased asset for accounting purpose.