On January 1 of the Current Year, Jenkins Company Signed

Multiple Choice

On January 1 of the current year, Jenkins Company signed a 6-year lease for equipment having a 9-year economic life. The present value of the monthly lease payments equaled 75% of the fair value of the equipment. No bargain purchase option or transfer of title was included. How will this lease be reflected on Jenkins' current year income statement?

A) Rent expense equal to the current year lease payments.
B) Rent expense equal to the current year lease payments less interest expense.
C) Interest expense and depreciation expense.
D) Lease amortization equal to one-sixth of the equipment's fair value.