Question

need help on a-c2

McCormick County agreed to acquire a new recreation equipment storage facility under a lease financing agreement. At the inception of the lease, a payment of $750,000 will be made; four additional annual lease payments, each in the amount of $750,000, are to be made at the end of each year, beginning late in the current year. The total amount to be paid under this lease is $3,750,000. The lease arrangements implied an annual interest rate of 6 percent. Therefore, the present value of the lease at inception, including the initial payment, is $3,348,829. Assume that the fair value of the building at the inception of the lease is $3,600,000. Required a. Prepare entries required to record the inception of the lease in the capital projects fund, the debt service fund, and the governmental activities journal. b. Prepare entries required to record the payment at the end of the first year of the lease in both the debt service fund and governmental activities journal. 1. Which financial statement(s) prepared at the end of the first year would show both the asset and the liability related to this lease? C-2. What amount would the liability be reported? complete this question by entering your answers in the tabs below. Required A Required B Required C1 Required C2 Prepare entries required to record the inception of the lease in the capital projects fund, the debt service fund, and the governmental activities Journal (ir no entry is required for a transaction/event, select "No Journal Entry Required in the first account field. Do not found intermediate calculations. Round your answers to the nearest whole dollar amount.) General Journal Debit Credit Fund Governmental Transaction Activties 1. Record the inception of the lease Capital Projects Fund < Prey 42 of 42 Next >

Answer 1

DR CR Record the inception of lease Fund Particulars Capital project fund Expenditure-Other financing source Capital lease agreement To record the capital project fund $ 33,48,829.00 $ 33,48,829.00 Debt service fund $ 7,50,000.00 Expenditure-principal Cash To record the debt service fund $ 7,50,000.00 $ 33,48,829.00 Governmental activities Building Capital lease obligation payable Bank To record the governmental activity $ 25,98,829.00 $ 7,50,000.00 DR Record the payment at the end of the year Fund Particulars Debt service fund Expenditure-principal Expenditure-interest Cash To record the debt service fund CR 594070 155930 750000 155930 594070 Governmental activities Expenditure-Interest on capital lease (WN) Capital lease payable Bank To record the governmental activity 750000 Value of asset Payment at the beginning of the lease Lease liability at the end of year 1 Interest expense @6% on 2598829 3348829 750000 2598829 155930 Government wide statement of net position is prepared at the end of the first year which shows the asset and liability related to the capital lease Lease liability at the end of the year 1 Capital lease payable Lease liability to be reported 2598829 594070 2004759