On January 1, 2011, Hanlin Corporation agrees to lease a piece of equipment for an annual payment of $3,000 with the first payment being made immediately. The lease will run for 4 years and the life of the equipment is 6 years. Hanlins incremental borrowing rate is 9 percent. No bargain purchase option exists, the ownership of the equipment will not be transferred to Hanlin at the end of the lease, there is no alternative use for the asset, and the payments do not approximate the fair value of the equipment. The adjusting entry made on December 31, 2011 (one day before the second lease payment is due) will be:

Group of answer choices

Lease Expense 3,000 Lease Liability 3,000

Lease_Expense___________ 3,000 Right-of-Use_Asset 2,317 Lease_Liability 683

Lease_Expense___________ 3,000 Right-of-Use Asset 2,317 Cash 683

Lease Expense 2,317 Lease Liability 2,317

Lease Liability 3,000 Cash 3,000