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Q1. On January 1, 2016, Gibson Corporation entered into a four-year operating lease. The payments were as follows: $23,500 for 2016, $19,000 for 2017, $17,500 for 2018, and $14,000 for 2019. What is the correct amount of lease expense for 2017?

A. 18,500

B.21,250

C. 19,000

D. 23,500

Q2. On February 1, 2016, Pearson Corporation became the lessee of equipment under a five-year, non-cancelable lease. The estimated economic life of the equipment is eight years. The fair value of the equipment was $660,000. The lease does not meet the definition of a capital lease in terms of a bargain purchase option, transfer of title, or the lease term. However, Pearson must classify this as a capital lease if the present value of the minimum lease payments is at least

A. $598,015

B. $660,000

C. $594,000

D. $528,000

Q3. On January 1, 2016, Wellburn Corporation leased an asset from Tabitha Company. The asset originally cost Tabitha $420,000. The lease agreement is an operating lease that calls for four annual payments beginning on January 1, 2016, in the amount of $40,000. The other three remaining payments will be made on January 1 of each subsequent year. Which of the following journal entries should Tabitha record on January 1, 2016?

CASH 40K DR / LEASE REVEIVABLE 40k CR

CASH 40K DR / DEFFERED RENT REVENUE 40K CR

CASH 40K DR / RENT REVENUE 40K CR

CASH 40K DR / RENT EXPENSE 40K CR

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