Pocahontas School District, an independent public school district, financed the acquisition of a new school bus by signing a note for $105,000 plus interest on the unpaid balance at 6 percent. Annual principal payments of $35,000, plus interest, are due each July 1. Assuming that the district maintains its books and records in a manner that facilitates the preparation of the government-wide financial statements, the appropriate entry at the date of acquisition is

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In government-wide financial statements, the acquisition of capital assets is recorded by debiting the capital assets account and crediting the notes payable (or similar liability account), reflecting the increase in assets and the corresponding liability from the financing arrangement. This approach is consistent with accrual accounting principles, which are applied in the preparation of government-wide financial statements.

Pocahontas School District, an Independent Public School District, Financed the Acquisition