A 5-year lease contract is signed on 1/1/x1 calling for $4,000 to be paid by the lessee on 12/31/x1, and $6,000 on 12/31/x2, x3, and x4.Total lease payments over the lease term are therefore $22,000.The lessee expects to use the leased asset evenly throughout the lease term, which ends 12/31/x4.No payment is due in 20x2.The entry recorded by the lessee for this operating lease, on 12/31/x1 includes which of the following?
A)dr.rent expense $4,400
B)dr.rent expense $4,000
C)cr.rent payable $200
D)dr.prepaid rent $400

Question

Quizplus · Accepted Answer

The correct entry for the lessee on 12/31/x1 includes a debit to rent expense for $4,000, which is the amount paid for the lease for that year. The lease payments are recognized as expenses in the periods to which they relate, and since $4,000 is paid on 12/31/x1, it is recognized as an expense for that year.

A 5-Year Lease Contract Is Signed on 1/1/x1 Calling for $4,000