A City entered into a long-term capital lease for some office equipment.Assuming the city maintains its books and records in a manner to facilitate preparation of fund financial statements, what entry would be made in the General Fund to record this event?

Question

Quizplus · Accepted Answer

A long-term capital lease would result in an expenditure for the city, which should be recorded in the General Fund. The appropriate entry would be to debit Expenditures and credit Other Financing Sources-Leases to recognize the cost and the financing for the equipment. Option B is incorrect because the city would not record the equipment purchased through the lease directly in the General Fund. Option C would be appropriate for recording the liability associated with the lease, but it would not capture the impact to the General Fund. Option D is incorrect because the event had a financial impact on the city.

A City Entered into a Long-Term Capital Lease for Some