On January 1 of the current year, Stephens Corporation leased machinery from Montgomery Company. The machine originally cost Montgomery $250,000. The lease agreement is an operating lease, the terms of which call for five annual payments of 25,000. The first payment is due at the inception of the lease; the other three payments are due on January 1 of subsequent years. What journal entry should Stephens make on January 1 of the current year?

A)
Cash
25,000

Lease Receivable

25,000

B)
Cash
25,000

Deferred Rent Revenue

25,000

C)
Cash
25,000

Rent Revenue

25,000

D)
Cash
25,000

Rent Expense

25,000

Answer: B