Which of the following is an appropriate journal entry for the recognition by a lessor of the first payment received under an operating lease arrangement?
A) DR Lease expense: CR Cash
B) DR Leased liability: CR Lease income
C) DR Cash: CR Lease income
D) DR Lease expense: CR Deferred initial direct costs

Question

Quizplus · Accepted Answer

When a lessor receives their first payment under an operating lease arrangement, they should recognize the payment as Lease Income. Therefore, the appropriate journal entry would be to debit Cash and credit Lease Income. Option C is the correct answer because it reflects this journal entry. Option A is incorrect because Lease Expense is an expense account used to recognize the cost of operating leases to the lessee, not the lessor. Option B is incorrect because Leased Liability is not an account typically used by lessors in operating leases. Option D is incorrect because Deferred Initial Direct Costs is an account used by lessors to recognize the upfront costs of leasing, but it is not relevant to the recognition of the first payment received.

Which of the Following Is an Appropriate Journal Entry for the Recognition