On January 1, 2010, Leslie Company signed a lease agreement requiring ten annual payments of $14, 000, beginning December 31, 2010.The agreement was classified as a capital lease.When reviewing Leslie's accounting records, which of the following would not be expected?

A)
$105,210\begin{array} { l r } \text { Leased Equipment } & 105,210 \\\text { Capital Lease Obligation } & 105,210\end{array}$
B)
$14,000\begin{array} { l c } \text { Interest Expense } & 7,365 \\\text { Obligation Under Capital Leases } & 6,635 \\\quad \text { Cash } & 14,000\end{array}$
C)
Depreciation Expense: Leased Equipment $\quad$ 10,521
Accumulated Depreciation:
Leased Equipment $\quad$ $\quad$ $\quad$ 10,521
D)
$14,000\begin{array} { l c } \text { Rent Expense } & 14,000 \\\text { Cash } & 14,000\end{array}$

Question

On January 1, 2010, Leslie Company signed a lease agreement requiring ten annual payments of $14, 000, beginning December 31, 2010.The agreement was classified as a capital lease.When reviewing Leslie's accounting records, which of the following would not be expected?

A)

105,210\begin{array} { l r } \text { Leased Equipment } & 105,210 \\\text { Capital Lease Obligation } & 105,210\end{array}

B)

14,000\begin{array} { l c } \text { Interest Expense } & 7,365 \\\text { Obligation Under Capital Leases } & 6,635 \\\quad \text { Cash } & 14,000\end{array}

C)
Depreciation Expense: Leased Equipment

\quad

10,521
Accumulated Depreciation:
Leased Equipment

\quad

\quad

\quad

10,521
D)

14,000\begin{array} { l c } \text { Rent Expense } & 14,000 \\\text { Cash } & 14,000\end{array}

Karina Perez · Accepted Answer

Final Answer : D, Explanation :  Rent expense would not be expected since the lease agreement is classified as a capital lease and therefore, the payments are classified as payments on a capital lease obligation and not as rent.

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