A five-year lease is signed by the City of Wachovia for equipment with a seven-year life. The asset will be returned to the lessor at the end of the lease. The present value of the lease is $20,000, and annual payments of $5,411.41 are payable beginning on the date the lease is signed. The interest portion of the second payment is $1,604.75. The equipment is to be used in City Hall and was purchased from appropriated funds of the General Fund.
What entry should be made for the government-wide financial statements on the date the lease is signed?

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E

Question

A five-year lease is signed by the City of Wachovia for equipment with a seven-year life. The asset will be returned to the lessor at the end of the lease. The present value of the lease is $20,000, and annual payments of $5,411.41 are payable beginning on the date the lease is signed. The interest portion of the second payment is $1,604.75. The equipment is to be used in City Hall and was purchased from appropriated funds of the General Fund.
What entry should be made for the government-wide financial statements on the date the lease is signed?

A) Option A 
B) Option B 
C) Option C 
D) Option D 
E) Option E

Quizplus · Accepted Answer

The Answer is D

A Five-Year Lease Is Signed by the City of Wachovia