Carweezy Autoparts leased an industrial press from Snap-On Tools on January 1, 2021. The lease...
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Carweezy Autoparts leased an industrial press from Snap-On Tools on January 1, 2021. The lease is for a 3-year period ending December 31, 2023. Annual payments are $42,000 beginning with the first payment on January 1, 2021, and each December 31 through 2022. NAPA has the option to purchase the industrial press on December 30, 2023 for $51,000, and exercise of the option seems reasonably certain. The machine's estimated useful life is 6 years with no salvage value. The implicit rate of return in the lease is 12%. Snap-On initially records the lease receivable at $149,283.
The entry on December 31, 2021 for Snap-On Tools will include which of the following?
| A. | Credit to interest revenue for $12,874 |
| B. | Debit to lease receivable for $29,126 |
| C. | Credit to cash for $42,000 |
| D. | Debit to lease payable for $29,126 |
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