Immediately After Making Its Annual $20,000 Lease Payment on June

Multiple Choice

Immediately after making its annual $20,000 lease payment on June 30,2014,the last day of its fiscal year,Capitol City had an unpaid capital lease obligation of $95,000.The interest rate applicable to the lease is 10 percent.When the $20,000 lease payment due on June 30,2015 is made,the journal entry for the governmental activities accounts will include

A) A debit to Capital Lease Obligation Payable in the amount of $10,500.
B) A debit to Capital Lease Obligation Payable in the amount of $20,000.
C) A debit to Cash in the amount of $20,000.
D) A debit to Capital Lease Obligation Payable in the amount of $12,500.