Andy Limited and Susan Limited enter into a lease agreement with the following terms: -The lease term is 3 years -Estimated economic life of the leased asset is 6 years -Three annual rental payments of $23 000 each payment is one year in arrears -The residual value at the end of the lease term is not guaranteed by the lessee -Interest rate implicit in the lease is 7% -The present value of the future lease payments is 60 358. Which is the correct journal entry recorded by the lessee when the payment is made at the end of the first year?

Select one:

a. DrInterest expense4 225 DrLease liability 18 775 CrCash 23 000

b. DrLease liability 1 610 DrInterest expense 21 390 CrCash 23 000

c. DrLease liability 4 225 DrInterest expense18 775 CrCash 23 000

d. DrInterest expense 1 610 DrLease liability 21 390 CrCash 23 000