Question：Which of the following accounting entries in the books of the lessee correctly record the acquisition of an asset subject to a finance lease?
(Cash price $150,000, total finance charges payable $70,000, initial deposit $20,000)
A. Dr assets $150,000.
B. Dr assets $150,000, Dr statement of profit or loss $70,000.
C. Cr Lessor $130,000, Cr bank $20,000.
D. Cr Lessor $200,000, Cr bank $20,000.
The correct answers are:
Dr assets $150,000
Cr Lessor $130,000, Cr bank $20,000.
The asset account is debited with the fair value of the asset.
Initially the total obligation to the lessor is recorded as $150,000 less a deposit of $20,000.