Question

Both a and c are correct. What is the effect of debiting a long-term asset amount and crediting Capital Lease Obligations payable?

1) Increase in long-term asset and decrease in Capital Lease Obligations payable
2) Decrease in long-term asset and increase in Capital Lease Obligations payable
3) Increase in both long-term asset and Capital Lease Obligations payable
4) Decrease in both long-term asset and Capital Lease Obligations payable

Answer 1

Debiting a long-term asset amount and crediting Capital Lease Obligations payable would result in a decrease in the long-term asset and an increase in the Capital Lease Obligations payable.

Step-by-step explanation:

The effect of debiting a long-term asset amount and crediting Capital Lease Obligations payable would be option 2) Decrease in long-term asset and increase in Capital Lease Obligations payable. When a long-term asset amount is debited, it means that the value of the asset is being reduced. On the other hand, when Capital Lease Obligations payable is credited, it means that the liability is increasing. Therefore, option 2) Decrease in long-term asset and increase in Capital Lease Obligations payable is the correct answer.