Mill's Tread Industries leased exercise equipment to Jim's Gyms on July 1, 2018. The lease does not meet the criteria for classification as a finance lease. The lease agreement specifies four annual payments of $80,000 beginning on July 1, 2018. The present value of those payments at a discount rate of 10% is $278,948. Which of the following is true regarding the entries made on July 1, 2018?

a. Jim's Gyms records a debit to rent expense for $278,948.

b. Mill's Tread records a credit to exercise equipment for $278,948.

c. Jim's Gyms records a credit to lease payable for $80,000.

d. Mill's Tread records a debit to cash for $80,000.