On January 1, 2013, a city entered into the following leases for equipment items. Each of the leases qualifies as a capital lease. Initial payments are on December 31,2013. An interest rate of 12 percent is viewed as appropriate. No bargain purchase options exist.
Fund | Annual Payments | Total Payments | Present Value of Total Payments |
General (10-year life)....... | $3,000 | $30,000 | $19,000 |
Enterprise (4-year life)... | 9,000 | 36,000 | 30,600 |
a. Prepare journal entries for the year 2013 for both of these leases for government-wide financial statements.
b. Prepare journal entries for the year 2013 for both of these leases for fund financial statements.
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