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StarGaze Company leased a truck for three months. Accounting guidance classifies the lease as an operating lease. StarGaze makes lease payments of $800 at the end of each month. Required: 1. What journal entry will StarGaze enter upon signing the lease and making its first cash payment of $800 cash to the leasing company? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Answer:

1. Journal entry upon signing Lease;

No entry required. This is an operating lease so the only reflected transaction would be the payment of the lease at the end of each month.

2. Entry upon making first payment.

End of month 1

DR Lease Rental expense ..........................................$800

CR Cash......................................................................................$800

(To record payment of lease expense)

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