Gambet Labs Entered into a Lease Agreement on January 1,20X3,to $\begin{array} { l l l } \text { Rent Expenco } & 13,000 & \\\text { Cash } & & 13,000 \\\end{array}$

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 31,20X3,to record the annual lease payment?

A) $\begin{array} { l l l } \text { Rent Expenco } & 13,000 & \\\text { Cash } & & 13,000 \\\end{array}$

B) $\begin{array}{lccc}\text { Capital Lease Obligation } & 13,000 & \\\text { Eash } & & 13,000 \\\end{array}$

C) $\begin{array}{lccc}\text { Capital Lease Obligation } & 2,080 & \\\text { Interest Expense } & 10,920 & \\\text { Cash } & & 13,000 \\\end{array}$

D) $\begin{array}{lccc}\text { Capital Lease Obligation } & 5,923 & \\\text { Interest Expense } & 7,077 & \\\text { Cash } & & 13,000 \\\end{array}$

E) $\begin{array}{lccc}\text { Capital Lease Obligation } & 11,180 & \\\text { Interest Expense } & 1,820 & \\\text { Cash } & & 13,000\end{array}$