Gambet Labs Entered into a Lease Agreement on January 1,20X3,to $\begin{array} { l l l } \text { Leasehold Amertization Expense } & 4,575 & \\\text { Machine Leasehold } & & 4,575 \\\end{array}$

Multiple Choice

Gambet Labs entered into a lease agreement on January 1,20X3,to use an x-ray machine.The machine has a useful life of 6 years.Gambet Labs will make annual lease payments of $13,000 for 6 years,beginning on December 31,20X3.Assume a 14% interest rate.Using the present value tables,what is the journal entry to be made by Gambet Labs on December 31,20X4,to amortize the leased asset,assuming straight-line amortization is used?

A) No journal entry is necessary.
B) $\begin{array} { l l l } \text { Leasehold Amertization Expense } & 4,575 & \\\text { Machine Leasehold } & & 4,575 \\\end{array}$

C) $\begin{array}{lccc}\text { Leasehold Amortization Expense } & \text { 8,426 } & \\\text { Machine Leasehold } & & \text { 1,426 } \\\end{array}$

D) $\begin{array}{lccc}\text { Leasehold Amortization Expense } & 13,000 & \\\quad \text { Machine Leasehold } & & 13,000 \\\end{array}$

E) $\begin{array}{lccc}\text { Leasehold Amortization Expense } & 13,000 & \\\text { Capital Lease Liability } & & 13,000\end{array}$