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Reed Machinery just signed a capital lease agreement with a present value of $130,000. How would this lease first appear on Reed Machinery's balance sheet?

Reed Machinery just signed a capital lease agreement with a present value of $130,000. How would this lease first appear on Reed Machinery's balance sheet?rev: 10_17_2017_QC_CS-105757

Capital leases do not appear on the balance sheet.

Assets under capital lease $260,000; Obligations under capital lease $260,000

Assets under capital lease $130,000; Obligations under capital lease $130,000

Assets under capital lease $260,000; Retained earnings committed to leases $260,000

Assets under capital lease $130,000; Retained earnings committed to leases $130,000

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