D is corrent. The solutions approach is to prepare the journal entry for the lease payment
| Capital lease obligation
(principal) | xxx | |
| Interest expense | xxx | |
| | xxx |
and
the journal entry for the lease amortization.
| Amortization of leased asset | xxx | |
| | Accumulated
amortization/depreciation |
| | xxx |
Therefore, only the amortization
of the leased asset results in a reduction of the carrying value of the asset
A is incorrect. The solutions approach is to prepare the journal entry for the lease payment
| Capital lease obligation
(principal) | xxx | |
| Interest expense | xxx | |
| | xxx |
and
the journal entry for the lease amortization.
| Amortization of leased asset | xxx | |
| | Accumulated
amortization/depreciation |
| | xxx |
Therefore, only the amortization
of the leased asset results in a reduction of the carrying value of the asset
C is incorrect. The solutions approach is to prepare the journal entry for the lease payment
| Capital lease obligation
(principal) | xxx | |
| Interest expense | xxx | |
| | xxx |
and
the journal entry for the lease amortization.
| Amortization of leased asset | xxx | |
| | Accumulated
amortization/depreciation |
| | xxx |
Therefore, only the amortization
of the leased asset results in a reduction of the carrying value of the asset
B is incorrect. The solutions approach is to prepare the journal entry for the lease payment
| Capital lease obligation
(principal) | xxx | |
| Interest expense | xxx | |
| | xxx |
and
the journal entry for the lease amortization.
| Amortization of leased asset | xxx | |
| | Accumulated
amortization/depreciation |
| | xxx |
Therefore, only the amortization
of the leased asset results in a reduction of the carrying value of the asset
