Quaid Ltd Entered into a Lease Agreement on 1 July

Quaid Ltd entered into a lease agreement on 1 July 2013 to lease equipment on the following terms: $$\begin{array} { | l | r | l | } \hline \text { Duration of lease } & 3 \text { years } & \\\hline \text { Useful life of leased asset } & 9 \text { years } & \\\hline \text { Lease payments (in arrears) } & \$ 4,000 & \begin{array} { l } \text { per year (3 payments) } \\\text { due 30 June }\end{array} \\\hline\end{array}$$ The interest rate implicit in the lease is 8% and the fair value of the leased asset is $24 987.The lease is cancellable if the lessee immediately enters into a further lease for the same or equivalent asset.The economic benefits provided by the lease asset are expected to be consumed evenly over its life.The lease payment has not been made on 30 June before the adjusting entries are made for the year end.What are the appropriate entries in the books of the lessee at the end of the reporting period 30 June 2014?

A) $$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Rental expense-equipment } & 4000 & \\\hline \mathrm { Cr } & \text { Accrued rental } & & 4000 \\\hline\end{array}$$
B) $$\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Rental expense-equipment } & 4000 & \\\hline \mathrm { Cr } & \text { Cash } & & 4000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Lease amortisation expense } & 3436 & \\\hline \mathrm { Cr } & \text { Accumulated amortisation } & & 3436 \\\hline\end{array}$$
C) $$\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Interest expense } & 825 & \\\hline \mathrm { Dr } & \text { Lease liability } & 3175 & \\\hline \mathrm { Cr } & \text { Accrued expenses } & & 4000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Lease amortisation expense } & 3436 & \\\hline \mathrm { Cr } & \text { Accumulated amortisation } & & 3436 \\\hline\end{array}$$
D) $\begin{array}{|c|l|r|r|}\hline \mathrm{Dr} & \text { Interest expense } & 1999 & \\\hline \mathrm{Dr} & \text { Lease liability } & 2001 & \\\hline \mathrm{Cr} & \text { Cash } & & 4000 \\\hline\\\hline \mathrm{Dr} & \text { Lease amortisation expense } & 3436 & \\\hline \mathrm{Cr} & \text { Accumulated amortisation } & & 3436 \\\hline\end{array}$

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