The City of Roswell has a 6/30 fiscal year-end. The city uses the consumption method for recognizing inventories and prepayments. On July 1, 2017, 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, 2018, the appropriate account balances in the general fund associated with this transaction would be

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Since the City of Roswell uses the consumption method for recognizing inventories and prepayments, the prepaid lease amount is recognized as an expenditure as it is consumed. Given it's a three-year lease with a total cost of $45,000, one year's expenditure (by June 30, 2018) would be $15,000 ($45,000/3). Therefore, the remaining prepaid lease amount is $30,000 ($45,000 - $15,000), and this amount is not classified as nonspendable in the fund balance because it has already been recognized as an expenditure for the year.

The City of Roswell Has a 6/30 Fiscal Year-End