Accounting For Governmental & Nonprofit Entities
18th Edition
ISBN: 9781259917059
Author: RECK, Jacqueline L., Lowensohn, Suzanne L., NEELY, Daniel G.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 5, Problem 17.9EP
Neighborville enters into a lease agreement for new copiers in all its city hall offices. In the General Fund at the inception of the lease, it should record
- a. Leased equipment balances equal to the lease payments made during the year.
- b. Expenditures equal to the initial lease payment.
- c. Leased equipment balances equal to the capitalizable cost of the lease assets regardless of the amount of lease payments made during the year.
- d. Expenditures equal to the capitalizable cost of the lease asset regardless of the amount of lease payments made during the year.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Laster City recorded a 20-year building rental agreement as a capital lease. An asset for the building lease was recorded in the general fixed assets account group. Where should the lease liability be reported?a. In the general long-term debt account groupb. In the debt service fundc. In the general fundd. A lease liability should not be reported.
Land City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expiration of the lease, the trucks will revert to the city. 1. Prepare appropriate journal entries in the general fund, the general fixed assets account group, and the general long-term debt account group to record the signing of the lease. 2. Prepare appropriate journal entries in the same fund and account groups to record the first payment on the lease. The city records depreciation on garbage trucks using the straight-line method.
Assume that a capital lease is initiated by a local governmental unit at 1/1/2021. The payments will be $100,000 per year at the end of each year. Assume that the net present value is $682,500. The implicit rate of interest is 3%. the journal entries for the lease incept on 1/1/2022 using the following assumptions:
A governmental fund records the lease
A proprietary fund records the lease
Chapter 5 Solutions
Accounting For Governmental & Nonprofit Entities
Ch. 5 - What are general capital assets? How are they...Ch. 5 - Explain what disclosures the GASB requires for...Ch. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - What is the accounting difference between using...Ch. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - What is a service concession arrangement, and why...
Ch. 5 - Prob. 13CCh. 5 - Prob. 14CCh. 5 - Prob. 15CCh. 5 - Under GASB standards, which of the following would...Ch. 5 - Two new copiers were purchased for use by the city...Ch. 5 - Maxim County just completed construction of a new...Ch. 5 - A capital projects fund would probably not be used...Ch. 5 - Machinery and equipment depreciation expense for...Ch. 5 - Prob. 17.6EPCh. 5 - Prob. 17.7EPCh. 5 - Callaway County issued 10,000,000 in bonds at 101...Ch. 5 - Neighborville enters into a lease agreement for...Ch. 5 - Neighborville enters into a lease agreement for...Ch. 5 - Prob. 17.11EPCh. 5 - Prob. 17.12EPCh. 5 - Prob. 17.13EPCh. 5 - Arbitrage rules under the Internal Revenue Code a....Ch. 5 - Prob. 17.15EPCh. 5 - Make all necessary entries in the appropriate...Ch. 5 - Prob. 19EPCh. 5 - Prob. 20EPCh. 5 - In the current year, the building occupied by...Ch. 5 - Prob. 22EPCh. 5 - Make all necessary entries in a capital projects...Ch. 5 - The year-end pre-closing trial balance for the...Ch. 5 - Prob. 25EPCh. 5 - This year Riverside began work on an outdoor...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Kendall County entered into a lease agreement to finance computer equipment used in government offices. The lease covers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At the inception of the lease, a payment of $640,000 will be made; two additional annual lease payments of $640,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,920,000. The lease arrangements implied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $1,864,620. Assume that the fair value of the equipment at the inception of the lease is $1,900,000. What amount would the liability be reported at the end of the first yeararrow_forward1. Clavel County leases an office building with a remaining economic life of 20 years. The fair market value of the building is $6 million. Annual lease payments are agreed at $523,107, based on a 6 percent interest rate. The lease meets the conditions for a capital lease.Record the lease and the first year’s interest payment (a) In a governmental fund (b) In the government-wide statements 2. Should the office building be depreciated? If so, how and where should depreciation be recorded? 3. Suppose the lease did not meet the conditions for a capital lease. How and where should the lease be recorded? Should the office building be depreciated? If so, how and where should depreciation be reported?arrow_forward1. Star City leased a bulldozer for use in activities accounted for in the General Fund. The City paid $30,000 and agreed to pay $30,000 per year for 3 years. The bulldozer has a useful life of six years. The lease qualified as a capital lease. Assuming that the city maintains is books and records in a manner that facilitates the preparation of the government-wide financial statements, the appropriate entry at the date of acquisition would be a. Debit Expenditures $120,000; Credit Cash $30,000 and Other Financing Sources $90,000. b. Debit Expenditures $40,000 and Prepaid Lease $80,000; Credit Cash $30,000 and Other Financing Sources $90,000. c. Debit Equipment $120,000; Credit Cash $30,000 and Lease Payable $90,000. d. Debit Expenditures $120,000; Credit Cash $30,000 and Lease Payable $90,000. 2. Star City leased a bulldozer for use in activities accounted for in the General Fund. The City paid $30,000 and agreed to pay $30,000 per year for 3 years. The bulldozer has a useful life of…arrow_forward
- At the start of Year 1, the City Peacock leased 30 computers for use by various officials in school administration and public safety at a total cost of $90,000 per year. The first lease payment is made immediately. The contracts are for five years, the expected life of the computers. After that life period, the city will return them to the lessor. What reporting is appropriate for the city for the first year?arrow_forwardBilberry County voted to establish an internal service fund to account for printing and copying for all its departments and agencies. The county engaged in the following activities related to the new fund on 1/1/2019. a) The county commission voted to transfer $300,000 from the general fund to the internal service fund to establish the new fund. b) Entered into a capital lease for equipment to be used in printing activities. The total present value of the lease obligation is $600,000. c) Issued $2 million in general obligation bonds at 101. The bonds were issued to acquire additional equipment and are to be serviced from the internal service fund. d) Purchased equipment for $1,950,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $150,000. e) Billed the general fund for copying and printing charges, $70,000. f) Paid salaries to printing employees, $50,000. a. Total Fixed Asset reported on the financial statement as of 1/1/2019 is? b. Total…arrow_forwardBilberry County voted to establish an internal service fund to account for printing and copying for all its departments and agencies. The county engaged in the following activities related to the new fund on 1/1/2019. a) The county commission voted to transfer $300,000 from the general fund to the internal service fund to establish the new fund. b) Entered into a capital lease for equipment to be used in printing activities. The total present value of the lease obligation is $600,000. c) Issued $2 million in general obligation bonds at 101. The bonds were issued to acquire additional equipment and are to be serviced from the internal service fund. d) Purchased equipment for $1,950,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $150,000. e) Billed the general fund for copying and printing charges, $70,000. f) Paid salaries to printing employees, $50,000. Total liability reported on the Financial statement as of 1/1/2019 is? answer please.arrow_forward
- 33) When a capital lease is used to lease fixed assets for the general government, the governmental fund acquiring the fixed assets debits ________ at the ________. A) expenditures; future value of the lease payments B) fixed assets; future value of the lease payments C) expenditures; present value of the lease payments D) fixed assets; present value of the lease payments 34) When recording an approved budget into the accounts of the general fund, which of the following accounts would be credited? A) Appropriations B) Encumbrances C) Estimated revenues D) Revenue collected in advance 35) When a city enters into a capital lease for a fixed asset for the general government, A) government-wide statements will report the asset and liability for the leased asset. B) government-wide statements will not report the liability, Capital Lease Obligation. C) governmental fund statements will report a fixed asset. D) governmental fund statements will report a liability, Capital Lease…arrow_forwardSuppose that in addition to the $67,299 annual rental payments, Kimberly-Clark is also required to pay $5,000 for insurance costs each year on the building directly to the lessor, Sheffield Storage. How would this executory cost affect the initial measurement of the lease liability and right-of-use asset?arrow_forwardThe City of Roswell has a 6/30 fiscal year-end. The City uses the consumption method for recognizing inventories and prepayments. On July 1, 2006, the City leased computer equipment for use in the City s general activities. The lease is a three-year lease that qualifies as an operating lease. The City prepaid the entire three-year rental fee of $45,000. At June 30, 2007, the appropriate account balances in the General Fund associated with this transaction would be Prepaid Lease $0; Expenditures $45,000; Fund Balance Reserved for Prepaid Lease $0. Prepaid Lease $30,000; Expenditures $15,000; Fund Balance Reserved for Prepaid Lease $30,000. Prepaid Lease $30,000; Expenditures $45,000; Fund Balance Reserved for Prepaid Lease $30,000. Prepaid Lease $30,000; Expenditures $15,000; Fund Balance Reserved for Prepaid Lease $0.arrow_forward
- On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $96,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 5%. Winn also paid a $321,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $417,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:Compute the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn’s fiscal year is the calendar year. (If no entry is required for a transaction/event, select…arrow_forwardOn January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $72,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 8%. Winn also paid a $231,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $303,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn’s fiscal year is the calendar year. (If no entry is required for a transaction/event, select…arrow_forwardArmstrong County established a COuty Office Building Construction Fund to account for a project that was exoected to take less then one year to complete. The County's fiscal year ends in June 30. !. On July 1, 2019, Bonds were sold at par in the amount $8,000,000 for the project. 2. On July 5, a contract was signed woith Sellers Construction Company in the amount of $7,890,000 3. On December 30, a progress bill was received from Sellers in the amount $5,000,000. The bill was paid, except for 5 percent retained upon final inspection. 4. On June1 a final bill was received in the amount of $2,890,000 from Sellers, which was paid, except for the 5 percent retained. An appointment was made between the county engineer and Bill Sellers to inspect the building and to develop a list of items that needed to be corrected. 5. On the day of the meeting , the county engineer discovered that Sellers has filed for bankruptcy and moved out of the state. The city incurred a liability in the amount of…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License