The amount recorded for a capital lease is the amount the entity would have paid if it had purchased the item rather than leased it. If an entity leased a machine for 10 years, agreeing to pay $12,500 per year, and if the purchase price of this machine was $100,000, this c _____ l ___ would be recorded as an asset at an amount of [$100,000 / $125,000], as in this entry:

Capital Lease. . . . . . . . . . . . . . . . . . . . . . . . . . .

Lease Obligation. . . . . . . . . . . . . . . . . . . . . .